Zevia PBC (NYSE:ZVIA) shares have continued their recent momentum with a 44% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.

Even after such a large jump in price, Zevia PBC may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.6x, since almost half of all companies in the Beverage industry in the United States have P/S ratios greater than 2.7x and even P/S higher than 5x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

What Does Zevia PBC's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Zevia PBC's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Do Revenue Forecasts Match The Low P/S Ratio?

Zevia PBC's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.5%. Regardless, revenue has managed to lift by a handy 16% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 6.7% during the coming year according to the six analysts following the company. With the industry only predicted to deliver 3.8%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Zevia PBC's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Zevia PBC's P/S

Zevia PBC's recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

To us, it seems Zevia PBC currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Zevia PBC (of which 1 is significant!) you should know about.

If you're unsure about the strength of Zevia PBC'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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