Village Farms International, Inc. (NASDAQ:VFF) Screens Well But There Might Be A Catch

With a price-to-sales (or "P/S") ratio of 0.2x Village Farms International, Inc. (NASDAQ:VFF) may be sending bullish signals at the moment, given that almost half of all the Food companies in the United States have P/S ratios greater than 0.8x and even P/S higher than 3x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Village Farms International

What Does Village Farms International's P/S Mean For Shareholders?

Village Farms International certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Village Farms International's Revenue Growth Trending?

Village Farms International's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. As a result, it also grew revenue by 25% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 6.1% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 2.6% each year, which is noticeably less attractive.

In light of this, it's peculiar that Village Farms International'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.

The Final Word

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.

Village Farms International'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. There could be some major risk factors that are placing downward 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.

It is also worth noting that we have found 1 warning sign for Village Farms International that you need to take into consideration.

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.