Market Cool On Eastside Distilling, Inc.'s (NASDAQ:EAST) Revenues

With a price-to-sales (or "P/S") ratio of 0.2x Eastside Distilling, Inc. (NASDAQ:EAST) may be sending very bullish signals at the moment, given that almost half of all the Beverage companies in the United States have P/S ratios greater than 2.3x and even P/S higher than 5x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Eastside Distilling

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

Eastside Distilling's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

How Is Eastside Distilling's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Eastside Distilling's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. The latest three year period has also seen a 19% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 47% per annum as estimated by the only analyst watching the company. With the industry only predicted to deliver 5.9% per year, 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. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Eastside Distilling's P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 6 warning signs for Eastside Distilling (4 don't sit too well with us) you should be aware of.

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.