A Piece Of The Puzzle Missing From Zevia PBC's (NYSE:ZVIA) 30% Share Price Climb

Despite an already strong run, Zevia PBC (NYSE:ZVIA) shares have been powering on, with a gain of 30% in the last thirty days. The annual gain comes to 147% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, it would still be understandable if you think Zevia PBC is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1.7x, considering almost half the companies in the United States' Beverage industry have P/S ratios above 2.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Zevia PBC

What Does Zevia PBC's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Zevia PBC's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Zevia PBC will help you uncover what's on the horizon.

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

In order to justify its P/S ratio, Zevia PBC would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.5%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 16% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next year should generate growth of 7.1% as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 3.4% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Zevia PBC's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Zevia PBC's P/S

The latest share price surge wasn't enough to lift Zevia PBC's P/S close to the industry median. 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.

To us, it seems Zevia PBC currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 3 warning signs for Zevia PBC (1 makes us a bit uncomfortable!) that you need to take into consideration.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.