Positive Sentiment Still Eludes Vasta Platform Limited (NASDAQ:VSTA) Following 27% Share Price Slump

To the annoyance of some shareholders, Vasta Platform Limited (NASDAQ:VSTA) shares are down a considerable 27% in the last month, which continues a horrid run for the company. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 43% in that time.

Since its price has dipped substantially, it would be understandable if you think Vasta Platform is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.6x, considering almost half the companies in the United States' Consumer Services industry have P/S ratios above 1.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Vasta Platform

How Vasta Platform Has Been Performing

Recent times haven't been great for Vasta Platform as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Vasta Platform's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Vasta Platform's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. Pleasingly, revenue has also lifted 73% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the four analysts following the company. That's shaping up to be similar to the 13% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Vasta Platform's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Final Word

The southerly movements of Vasta Platform's shares means its P/S is now sitting at a pretty low level. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

It looks to us like the P/S figures for Vasta Platform remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Vasta Platform with six simple checks on some of these key factors.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.