Viasat, Inc.'s (NASDAQ:VSAT) Price Is Right But Growth Is Lacking After Shares Rocket 33%

Viasat, Inc. (NASDAQ:VSAT) shareholders have had their patience rewarded with a 33% share price jump in the last month. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Even after such a large jump in price, Viasat may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Communications industry in the United States have P/S ratios greater than 2x and even P/S higher than 4x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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Check out our latest analysis for Viasat

How Viasat Has Been Performing

Recent revenue growth for Viasat has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Viasat's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Viasat's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 5.5% last year. Pleasingly, revenue has also lifted 87% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 2.7% per annum as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 8.6% each year, which is noticeably more attractive.

In light of this, it's understandable that Viasat's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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

As we suspected, our examination of Viasat's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Viasat 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.