Tattooed Chef, Inc.'s (NASDAQ:TTCF) Popularity With Investors Is Clear

It's not a stretch to say that Tattooed Chef, Inc.'s (NASDAQ:TTCF) price-to-sales (or "P/S") ratio of 0.6x right now seems quite "middle-of-the-road" for companies in the Food industry in the United States, where the median P/S ratio is around 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Tattooed Chef

What Does Tattooed Chef's P/S Mean For Shareholders?

Recent times haven't been great for Tattooed Chef as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For Tattooed Chef?

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

Taking a look back first, we see that the company grew revenue by an impressive 19% last year. The strong recent performance means it was also able to grow revenue by 173% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 5.2% over the next year. That's shaping up to be similar to the 5.1% growth forecast for the broader industry.

With this information, we can see why Tattooed Chef is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Key Takeaway

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.

Our look at Tattooed Chef's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Tattooed Chef (of which 1 can't be ignored!) you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.