Optimistic Investors Push Viasat, Inc. (NASDAQ:VSAT) Shares Up 66% But Growth Is Lacking

Viasat, Inc. (NASDAQ:VSAT) shareholders would be excited to see that the share price has had a great month, posting a 66% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

In spite of the firm bounce in price, it's still not a stretch to say that Viasat's price-to-sales (or "P/S") ratio of 0.7x right now seems quite "middle-of-the-road" compared to the Communications industry in the United States, where the median P/S ratio is around 1.1x. 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 Viasat

What Does Viasat's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Viasat has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

How Is Viasat's Revenue Growth Trending?

Viasat's 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.

Retrospectively, the last year delivered an exceptional 68% gain to the company's top line. Pleasingly, revenue has also lifted 102% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 1.7% over the next year. Meanwhile, the broader industry is forecast to expand by 5.6%, which paints a poor picture.

With this information, we find it concerning that Viasat is trading at a fairly similar P/S compared to the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What Does Viasat's P/S Mean For Investors?

Its shares have lifted substantially and now Viasat's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

While Viasat's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

It is also worth noting that we have found 3 warning signs for Viasat (1 is a bit concerning!) 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.