There's No Escaping Viva Energy Group Limited's (ASX:VEA) Muted Revenues

Viva Energy Group Limited's (ASX:VEA) price-to-sales (or "P/S") ratio of 0.1x might make it look like a strong buy right now compared to the Oil and Gas industry in Australia, where around half of the companies have P/S ratios above 5.1x and even P/S above 81x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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Check out our latest analysis for Viva Energy Group

How Has Viva Energy Group Performed Recently?

With revenue growth that's superior to most other companies of late, Viva Energy Group has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Viva Energy Group.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Viva Energy Group would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. This was backed up an excellent period prior to see revenue up by 90% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 0.7% per year as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 955% per year, which is noticeably more attractive.

With this in consideration, its clear as to why Viva Energy Group's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Viva Energy Group's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Viva Energy Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

Having said that, be aware Viva Energy Group is showing 2 warning signs in our investment analysis, you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.