B&G Foods, Inc.'s (NYSE:BGS) 26% Dip In Price Shows Sentiment Is Matching Revenues

The B&G Foods, Inc. (NYSE:BGS) share price has fared very poorly over the last month, falling by a substantial 26%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 32% share price drop.

After such a large drop in price, B&G Foods' price-to-sales (or "P/S") ratio of 0.3x might make it look like a buy right now compared to the Food industry in the United States, where around half of the companies have P/S ratios above 1x and even P/S above 3x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for B&G Foods

How B&G Foods Has Been Performing

B&G Foods could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on B&G Foods.

Is There Any Revenue Growth Forecasted For B&G Foods?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 7.1%. The last three years don't look nice either as the company has shrunk revenue by 1.8% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue growth is heading into negative territory, declining 1.3% over the next year. Meanwhile, the broader industry is forecast to expand by 2.9%, which paints a poor picture.

With this in consideration, we find it intriguing that B&G Foods' P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does B&G Foods' P/S Mean For Investors?

B&G Foods' recently weak share price has pulled its P/S back below other Food companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's clear to see that B&G Foods maintains its low P/S on the weakness of its forecast for sliding revenue, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

Before you settle on your opinion, we've discovered 2 warning signs for B&G Foods (1 can't be ignored!) that you should be aware of.

If you're unsure about the strength of B&G Foods' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.