Molson Coors Beverage Company's (NYSE:TAP) Shares Lagging The Industry But So Is The Business

When you see that almost half of the companies in the Beverage industry in the United States have price-to-sales ratios (or "P/S") above 3.2x, Molson Coors Beverage Company (NYSE:TAP) looks to be giving off very strong buy signals with its 1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Molson Coors Beverage

What Does Molson Coors Beverage's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Molson Coors Beverage has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is Molson Coors Beverage's Revenue Growth Trending?

In order to justify its P/S ratio, Molson Coors Beverage would need to produce anemic growth that's substantially trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.8% last year. The latest three year period has also seen a 21% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 0.2% per annum during the coming three years according to the analysts following the company. With the industry predicted to deliver 4.5% growth per year, that's a disappointing outcome.

With this information, we are not surprised that Molson Coors Beverage is trading at a P/S lower than the industry. 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.

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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Molson Coors Beverage's P/S is on the lower end of the spectrum. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Molson Coors Beverage (1 can't be ignored!) that you should be aware of before investing here.

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.