Investors Still Aren't Entirely Convinced By Eastside Distilling, Inc.'s (NASDAQ:EAST) Revenues Despite 75% Price Jump

Eastside Distilling, Inc. (NASDAQ:EAST) shares have had a really impressive month, gaining 75% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 11% over that time.

Even after such a large jump in price, Eastside Distilling's price-to-sales (or "P/S") ratio of 0.2x might still make it look like a strong buy right now compared to the wider Beverage industry in the United States, where around half of the companies have P/S ratios above 2.7x and even P/S above 5x are quite common. 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

What Does Eastside Distilling's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Eastside Distilling's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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.

Retrospectively, the last year delivered a frustrating 4.2% 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 26% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 35% per annum over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 4.7% per annum, which is noticeably less attractive.

In light of this, it's peculiar that Eastside Distilling's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Eastside Distilling's P/S

Even after such a strong price move, Eastside Distilling's P/S still trails the rest of 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.

Eastside Distilling's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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.

Before you take the next step, you should know about the 6 warning signs for Eastside Distilling (4 don't sit too well with us!) that we have uncovered.

If these risks are making you reconsider your opinion on Eastside Distilling, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.