Slammed 27% Vasta Platform Limited (NASDAQ:VSTA) Screens Well Here But There Might Be A Catch

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. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 43% share price drop.

Since its price has dipped substantially, considering around half the companies operating in the United States' Consumer Services industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider Vasta Platform as an solid investment opportunity with its 0.6x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Vasta Platform

How Has Vasta Platform Performed Recently?

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 you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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.

How Is Vasta Platform's Revenue Growth Trending?

In order to justify its P/S ratio, Vasta Platform would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 15% gain to the company's revenues. Pleasingly, revenue has also lifted 73% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 13% over the next year. With the industry predicted to deliver 13% growth , the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Vasta Platform's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Vasta Platform's P/S Mean For Investors?

The southerly movements of Vasta Platform's shares means its P/S is now sitting at a pretty low level. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've seen that Vasta Platform currently trades on a lower than expected P/S since its forecast growth is in line with the wider 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Vasta Platform with six simple checks on some of these key factors.

If you're unsure about the strength of Vasta Platform'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.