Slammed 41% BRC Inc. (NYSE:BRCC) Screens Well Here But There Might Be A Catch

BRC Inc. (NYSE:BRCC) shareholders won't be pleased to see that the share price has had a very rough month, dropping 41% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 15% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about BRC's P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Food industry in the United States is also close to 1x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for BRC

How BRC Has Been Performing

BRC certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, BRC would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. Pleasingly, revenue has also lifted 102% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 16% per annum as estimated by the eight analysts watching the company. With the industry only predicted to deliver 3.2% each year, the company is positioned for a stronger revenue result.

In light of this, it's curious that BRC's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From BRC's P/S?

With its share price dropping off a cliff, the P/S for BRC looks to be in line with the rest of the Food industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Looking at BRC's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You always need to take note of risks, for example - BRC has 1 warning sign we think you should be aware of.

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