To the annoyance of some shareholders, Edible Garden AG Incorporated (NASDAQ:EDBL) shares are down a considerable 65% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 95% share price decline.

Since its price has dipped substantially, when close to half the companies operating in the United States' Food industry have price-to-sales ratios (or "P/S") above 1x, you may consider Edible Garden as an enticing stock to check out with its 0.3x 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.

How Has Edible Garden Performed Recently?

With revenue growth that's superior to most other companies of late, Edible Garden has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 out of favour.

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

How Is Edible Garden's Revenue Growth Trending?

In order to justify its P/S ratio, Edible Garden would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 31%. The strong recent performance means it was also able to grow revenue by 51% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 16% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 2.2%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Edible Garden's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Edible Garden's P/S Mean For Investors?

Edible Garden's P/S has taken a dip along with its share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Edible Garden's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Having said that, be aware Edible Garden is showing 6 warning signs in our investment analysis, and 5 of those can't be ignored.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.