There wouldn't be many who think WK Kellogg Co's (NYSE:KLG) price-to-sales (or "P/S") ratio of 0.5x is worth a mention when the median P/S for the Food industry in the United States is similar at about 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How WK Kellogg Co Has Been Performing

Recent times haven't been great for WK Kellogg Co as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is WK Kellogg Co's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like WK Kellogg Co's to be considered reasonable.

Retrospectively, the last year delivered a decent 2.5% gain to the company's revenues. Still, lamentably revenue has fallen 3.6% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to slump, contracting by 1.0% each year during the coming three years according to the nine analysts following the company. With the industry predicted to deliver 2.9% growth per year, that's a disappointing outcome.

In light of this, it's somewhat alarming that WK Kellogg Co's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. 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.

The Bottom Line On WK Kellogg Co's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

While WK Kellogg Co'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 poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

Before you settle on your opinion, we've discovered 3 warning signs for WK Kellogg Co that you should be aware of.

If you're unsure about the strength of WK Kellogg Co's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.