When you see that almost half of the companies in the Oil and Gas industry in the United States have price-to-sales ratios (or "P/S") above 1.7x, Green Plains Inc. (NASDAQ:GPRE) looks to be giving off some buy signals with its 0.4x 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.  

See our latest analysis for Green Plains

NasdaqGS:GPRE Price to Sales Ratio vs Industry January 17th 2024

What Does Green Plains' Recent Performance Look Like?

With only a limited decrease in revenue compared to most other companies of late, Green Plains has been doing relatively well.   Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed.  You'd much rather the company continue improving its revenue if you still believe in the business.  In saying that, existing shareholders probably aren't pessimistic about the share price if the company's revenue continues outplaying the industry.    

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

Do Revenue Forecasts Match The Low P/S Ratio?  

Green Plains' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.  

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.5%.   However, a few very strong years before that means that it was still able to grow revenue by an impressive 62% in total over the last three years.  So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.  

Turning to the outlook, the next three years should generate growth of 8.0%  per annum as estimated by the ten analysts watching the company.  With the industry only predicted to deliver 1.0% per annum, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Green Plains' P/S sits below the majority of other companies.  It looks like most investors are not convinced at all that the company can achieve future growth expectations.  

The Bottom Line On Green Plains' P/S

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.

Green Plains' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.    

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Green Plains, and understanding  should be part of your investment process.  

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.