Pactiv Evergreen Inc.'s (NASDAQ:PTVE) Price Is Right But Growth Is Lacking After Shares Rocket 28%

The Pactiv Evergreen Inc. (NASDAQ:PTVE) share price has done very well over the last month, posting an excellent gain of 28%. Taking a wider view, although not as strong as the last month, the full year gain of 20% is also fairly reasonable.

Even after such a large jump in price, when close to half the companies operating in the United States' Packaging industry have price-to-sales ratios (or "P/S") above 1x, you may still consider Pactiv Evergreen as an enticing stock to check out with its 0.5x 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 limited.

Check out our latest analysis for Pactiv Evergreen

How Has Pactiv Evergreen Performed Recently?

Pactiv Evergreen could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For Pactiv Evergreen?

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

Retrospectively, the last year delivered a frustrating 9.0% decrease to the company's top line. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 0.8% over the next year. With the industry predicted to deliver 15% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Pactiv Evergreen's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Pactiv Evergreen's P/S

The latest share price surge wasn't enough to lift Pactiv Evergreen'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.

We've established that Pactiv Evergreen maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. 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.

It is also worth noting that we have found 1 warning sign for Pactiv Evergreen that you need to take into consideration.

If these risks are making you reconsider your opinion on Pactiv Evergreen, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.