Investors Appear Satisfied With TreeHouse Foods, Inc.'s (NYSE:THS) Prospects

With a median price-to-sales (or "P/S") ratio of close to 0.9x in the Food industry in the United States, you could be forgiven for feeling indifferent about TreeHouse Foods, Inc.'s (NYSE:THS) P/S ratio of 0.8x. 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.

Check out our latest analysis for TreeHouse Foods

How Has TreeHouse Foods Performed Recently?

Recent revenue growth for TreeHouse Foods has been in line with the industry. The P/S ratio is probably moderate because investors think this modest revenue performance will continue. Those who are bullish on TreeHouse Foods will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

Is There Some Revenue Growth Forecasted For TreeHouse Foods?

TreeHouse Foods' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 34%. Still, revenue has fallen 17% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Shifting to the future, estimates from the seven analysts covering the company suggest revenue should grow by 4.0% per year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 3.7% per year, which is not materially different.

With this information, we can see why TreeHouse Foods 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.

What Does TreeHouse Foods' P/S Mean For Investors?

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.

A TreeHouse Foods' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Food industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 3 warning signs for TreeHouse Foods you should be aware of, and 1 of them doesn't sit too well with us.

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.