Yahoo Finance Investors Aren't Entirely Convinced By EZFill Holdings Inc.'s (NASDAQ:EZFL) Revenues
When you see that almost half of the companies in the Oil and Gas industry in the United States have price-to-sales ratios (or "P/S") above 1.4x, EZFill Holdings Inc. (NASDAQ:EZFL) looks to be giving off some buy signals with its 0.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.
View our latest analysis for EZFill Holdings
How Has EZFill Holdings Performed Recently?
EZFill Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
Want the full picture on analyst estimates for the company? Then our free report on EZFill Holdings will help you uncover what's on the horizon.
How Is EZFill Holdings' Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as low as EZFill Holdings' is when the company's growth is on track to lag the industry.
If we review the last year of revenue growth, the company posted a terrific increase of 108%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. 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 only analyst covering the company suggest revenue growth will be highly resilient over the next year growing by 115%. With the rest of the industry predicted to shrink by 8.8%, that would be a fantastic result.
With this in mind, we find it intriguing that EZFill Holdings' P/S falls short of its industry peers. It looks like most investors aren't convinced at all that the company can achieve positive future growth in the face of a shrinking broader industry.
The Final Word
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
Our examination of EZFill Holdings' analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. One major risk is whether its revenue trajectory can keep outperforming under these tough industry conditions. So, the risk of a price drop looks to be subdued, but investors seem to think future revenue could see a lot of volatility.
There are also other vital risk factors to consider and we've discovered 5 warning signs for EZFill Holdings (2 shouldn't be ignored!) that you should be aware of before investing here.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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