Pilgrim's Pride Corporation's (NASDAQ:PPC) Shareholders Might Be Looking For Exit

With a median price-to-sales (or "P/S") ratio of close to 0.9x in the Food industry in the United States, you could be forgiven for feeling indifferent about Pilgrim's Pride Corporation's (NASDAQ:PPC) P/S ratio of 0.6x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Pilgrim's Pride

What Does Pilgrim's Pride's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Pilgrim's Pride has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Pilgrim's Pride's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 6.2%. This was backed up an excellent period prior to see revenue up by 30% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 0.7% each year as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 2.8% each year, which is noticeably more attractive.

With this in mind, we find it intriguing that Pilgrim's Pride's P/S is closely matching its industry peers. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From Pilgrim's Pride's P/S?

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.

Given that Pilgrim's Pride's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Pilgrim's Pride, and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Pilgrim's Pride, 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.