Sow Good Inc. (NASDAQ:SOWG) shares have had a horrible month, losing 44% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 85% share price decline.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Sow Good's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Food industry in the United States is also close to 0.8x. 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.

What Does Sow Good's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Sow Good has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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.

How Is Sow Good's Revenue Growth Trending?

Sow Good's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 99%. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 4.3% over the next year. With the industry only predicted to deliver 1.7%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Sow Good's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Following Sow Good's share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Sow Good currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 4 warning signs we've spotted with Sow Good (including 3 which are a bit concerning).

If these risks are making you reconsider your opinion on Sow Good, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.