LARK Distilling Co. Ltd.'s (ASX:LRK) Price In Tune With Revenues
When you see that almost half of the companies in the Beverage industry in Australia have price-to-sales ratios (or "P/S") below 0.9x, LARK Distilling Co. Ltd. (ASX:LRK) looks to be giving off strong sell signals with its 4.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.
See our latest analysis for LARK Distilling
What Does LARK Distilling's Recent Performance Look Like?
LARK Distilling could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on LARK Distilling.Is There Enough Revenue Growth Forecasted For LARK Distilling?
In order to justify its P/S ratio, LARK Distilling would need to produce outstanding growth that's well in excess of the industry.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 7.5%. This means it has also seen a slide in revenue over the longer-term as revenue is down 24% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Turning to the outlook, the next three years should generate growth of 25% per year as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 3.7% per annum growth forecast for the broader industry.
With this information, we can see why LARK Distilling is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Bottom Line On LARK Distilling's P/S
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 LARK Distilling maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Beverage industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
Before you settle on your opinion, we've discovered 3 warning signs for LARK Distilling (1 is a bit unpleasant!) that you should be aware of.
If these risks are making you reconsider your opinion on LARK Distilling, explore our interactive list of high quality stocks to get an idea of what else is out there.
If you're looking to trade LARK Distilling, open an account with the lowest-cost platform trusted by professionals, Interactive Brokers.
With clients in over 200 countries and territories, and access to 160 markets, IBKR lets you trade stocks, options, futures, forex, bonds and funds from a single integrated account.
Enjoy no hidden fees, no account minimums, and FX conversion rates as low as 0.03%, far better than what most brokers offer.
Sponsored ContentNew: AI Stock Screener & Alerts
Our new AI Stock Screener scans the market every day to uncover opportunities.
• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies
Or build your own from over 50 metrics.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About ASX:LRK
LARK Distilling
Engages in the production, marketing, distribution, and sale of craft spirits.
Flawless balance sheet low.
Market Insights
Community Narratives


