A Piece Of The Puzzle Missing From SunOpta Inc.'s (NASDAQ:STKL) 49% Share Price Climb

SunOpta Inc. (NASDAQ:STKL) shareholders are no doubt pleased to see that the share price has bounced 49% in the last month, although it is still struggling to make up recently lost ground. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, there still wouldn't be many who think SunOpta's price-to-sales (or "P/S") ratio of 0.9x is worth a mention when the median P/S in the United States' Food industry is similar at about 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for SunOpta

What Does SunOpta's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, SunOpta has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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How Is SunOpta's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like SunOpta's to be considered reasonable.

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 12% overall drop in revenue. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 9.9% over the next year. That's shaping up to be materially higher than the 2.7% growth forecast for the broader industry.

With this information, we find it interesting that SunOpta is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

SunOpta appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've established that SunOpta currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for SunOpta that you should be aware of.

If these risks are making you reconsider your opinion on SunOpta, 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.