Yahoo Finance Not Many Are Piling Into Various Eateries PLC (LON:VARE) Just Yet
With a median price-to-sales (or "P/S") ratio of close to 1x in the Hospitality industry in the United Kingdom, you could be forgiven for feeling indifferent about Various Eateries PLC's (LON:VARE) P/S ratio of 0.9x. 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 Various Eateries
What Does Various Eateries' P/S Mean For Shareholders?
Recent times have been advantageous for Various Eateries as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.
Keen to find out how analysts think Various Eateries' future stacks up against the industry? In that case, our free report is a great place to start.
Is There Some Revenue Growth Forecasted For Various Eateries?
There's an inherent assumption that a company should be matching the industry for P/S ratios like Various Eateries' to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 83% last year. Pleasingly, revenue has also lifted 59% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 14% growth forecast for the broader industry.
With this information, we find it interesting that Various Eateries is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.
What Does Various Eateries' P/S Mean For Investors?
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.
Looking at Various Eateries' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.
You should always think about risks. Case in point, we've spotted 2 warning signs for Various Eateries you should be aware of, and 1 of them can't be ignored.
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.
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.
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