Eneco Refresh Limited (ASX:ERG) shareholders won't be pleased to see that the share price has had a very rough month, dropping 35% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 8.3% in the last year.

Since its price has dipped substantially, Eneco Refresh may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Beverage industry in Australia have P/S ratios greater than 1x and even P/S higher than 3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Eneco Refresh

How Eneco Refresh Has Been Performing

Eneco Refresh has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Although there are no analyst estimates available for Eneco Refresh, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Eneco Refresh?

The only time you'd be truly comfortable seeing a P/S as low as Eneco Refresh's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.0% last year. Revenue has also lifted 20% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 6.4% shows it's about the same on an annualised basis.

With this in consideration, we find it intriguing that Eneco Refresh's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

The southerly movements of Eneco Refresh's shares means its P/S is now sitting at a pretty low level. 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.

Our examination of Eneco Refresh revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

Before you take the next step, you should know about the 3 warning signs for Eneco Refresh that we have uncovered.

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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