BJ's Restaurants, Inc. (NASDAQ:BJRI) shares have had a really impressive month, gaining 28% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 3.6% in the last twelve months.

In spite of the firm bounce in price, it would still be understandable if you think BJ's Restaurants is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.5x, considering almost half the companies in the United States' Hospitality industry have P/S ratios above 1.3x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for BJ's Restaurants

How Has BJ's Restaurants Performed Recently?

BJ's Restaurants could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For BJ's Restaurants?

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

Retrospectively, the last year delivered a decent 9.7% gain to the company's revenues. The latest three year period has also seen an excellent 55% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 5.1% each year as estimated by the nine analysts watching the company. With the industry predicted to deliver 13% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why BJ's Restaurants' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From BJ's Restaurants' P/S?

BJ's Restaurants' stock price has surged recently, but its but its P/S still remains modest. 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 BJ's Restaurants 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. The company will need a change of fortune to justify the P/S rising higher in the future.

You always need to take note of risks, for example - BJ's Restaurants has 1 warning sign we think you should be aware of.

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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