Zevia PBC (NYSE:ZVIA) Doing What It Can To Lift Shares

Zevia PBC's (NYSE:ZVIA) price-to-sales (or "P/S") ratio of 0.6x might make it look like a buy right now compared to the Beverage industry in the United States, where around half of the companies have P/S ratios above 2.5x and even P/S above 6x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Zevia PBC

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

Recent times haven't been great for Zevia PBC as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. 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.

How Is Zevia PBC's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Zevia PBC's to be considered reasonable.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Although pleasingly revenue has lifted 49% in aggregate from three years ago, notwithstanding the last 12 months. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Turning to the outlook, the next year should generate growth of 13% as estimated by the seven analysts watching the company. With the industry only predicted to deliver 5.2%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Zevia PBC is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

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.

Zevia PBC's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You always need to take note of risks, for example - Zevia PBC has 3 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.