Investors Aren't Entirely Convinced By RiceBran Technologies' (NASDAQ:RIBT) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 0.2x RiceBran Technologies (NASDAQ:RIBT) is a stock worth checking out, seeing as almost half of all the Food companies in the United States have P/S ratios greater than 0.9x and even P/S higher than 3x 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 limited.

Check out our latest analysis for RiceBran Technologies

How Has RiceBran Technologies Performed Recently?

Recent times have been quite advantageous for RiceBran Technologies as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on RiceBran Technologies will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on RiceBran Technologies will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as RiceBran Technologies' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 34%. The strong recent performance means it was also able to grow revenue by 76% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 5.1%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it odd that RiceBran Technologies is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does RiceBran Technologies' P/S Mean For Investors?

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.

We're very surprised to see RiceBran Technologies currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

We don't want to rain on the parade too much, but we did also find 4 warning signs for RiceBran Technologies (2 make us uncomfortable!) that you need to be mindful of.

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).

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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.