When close to half the companies operating in the Food industry in Australia have price-to-sales ratios (or "P/S") above 0.9x, you may consider Bega Cheese Limited (ASX:BGA) as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Bega Cheese

How Bega Cheese Has Been Performing

Recent revenue growth for Bega Cheese has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Bega Cheese's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

Bega Cheese's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. Pleasingly, revenue has also lifted 126% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 3.0% per annum during the coming three years according to the ten analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 5.8% per year, which is noticeably more attractive.

With this information, we can see why Bega Cheese is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Bega Cheese's P/S Mean For Investors?

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.

As expected, our analysis of Bega Cheese's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Bega Cheese with six simple checks.