Veganz Group AG (ETR:VEZ) Stocks Pounded By 25% But Not Lagging Industry On Growth Or Pricing

To the annoyance of some shareholders, Veganz Group AG (ETR:VEZ) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Still, a bad month hasn't completely ruined the past year with the stock gaining 37%, which is great even in a bull market.

In spite of the heavy fall in price, when almost half of the companies in Germany's Food industry have price-to-sales ratios (or "P/S") below 1x, you may still consider Veganz Group as a stock probably not worth researching with its 2.1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Veganz Group

How Veganz Group Has Been Performing

Recent times haven't been great for Veganz Group as its revenue has been falling quicker than most other companies. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Veganz Group will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Veganz Group's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a frustrating 34% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 64% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 78% each year as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 24% per annum growth forecast for the broader industry.

In light of this, it's understandable that Veganz Group's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Veganz Group's P/S?

Despite the recent share price weakness, Veganz Group's P/S remains higher than most other companies in the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Veganz Group maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Food industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Veganz Group (1 is a bit concerning!) that we have uncovered.

If you're unsure about the strength of Veganz Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.