Eastside Distilling, Inc. (NASDAQ:EAST) Stock Rockets 27% But Many Are Still Ignoring The Company

Eastside Distilling, Inc. (NASDAQ:EAST) shareholders have had their patience rewarded with a 27% share price jump in the last month. But the last month did very little to improve the 60% share price decline over the last year.

Even after such a large jump in price, Eastside Distilling may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Beverage industry in the United States have P/S ratios greater than 2.6x and even P/S higher than 6x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Eastside Distilling

How Has Eastside Distilling Performed Recently?

Eastside Distilling could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

How Is Eastside Distilling's Revenue Growth Trending?

In order to justify its P/S ratio, Eastside Distilling would need to produce anemic growth that's substantially trailing 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 23%. This means it has also seen a slide in revenue over the longer-term as revenue is down 29% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 41% over the next year. With the industry only predicted to deliver 3.4%, the company is positioned for a stronger revenue result.

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

The Key Takeaway

Even after such a strong price move, Eastside Distilling's P/S still trails the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Eastside Distilling's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

You should always think about risks. Case in point, we've spotted 6 warning signs for Eastside Distilling you should be aware of, and 4 of them are significant.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com