Sentiment Still Eluding Vasta Platform Limited (NASDAQ:VSTA)

With a median price-to-sales (or "P/S") ratio of close to 1.7x in the Consumer Services industry in the United States, you could be forgiven for feeling indifferent about Vasta Platform Limited's (NASDAQ:VSTA) P/S ratio of 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Vasta Platform

How Vasta Platform Has Been Performing

Recent times have been advantageous for Vasta Platform as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

The only time you'd be comfortable seeing a P/S like Vasta Platform's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company grew revenue by an impressive 33% last year. As a result, it also grew revenue by 28% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 16% per annum as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 11% each year, which is noticeably less attractive.

With this information, we find it interesting that Vasta Platform is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Vasta Platform's P/S?

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.

Looking at Vasta Platform's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Vasta Platform with six simple checks will allow you to discover any risks that could be an issue.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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.