It's not a stretch to say that Brookfield Renewable Corporation's (NYSE:BEPC) price-to-sales (or "P/S") ratio of 2.1x seems quite "middle-of-the-road" for Renewable Energy companies in the United States, seeing as it matches the P/S ratio of the wider industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.
Check out our latest analysis for Brookfield Renewable
How Has Brookfield Renewable Performed Recently?
Recent times haven't been great for Brookfield Renewable as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.
Keen to find out how analysts think Brookfield Renewable's future stacks up against the industry? In that case, our free report is a great place to start.Is There Some Revenue Growth Forecasted For Brookfield Renewable?
The only time you'd be comfortable seeing a P/S like Brookfield Renewable's is when the company's growth is tracking the industry closely.
Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow revenue by an impressive 33% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.
Looking ahead now, revenue is anticipated to climb by 13% per annum during the coming three years according to the five analysts following the company. That's shaping up to be materially higher than the 9.1% each year growth forecast for the broader industry.
With this in consideration, we find it intriguing that Brookfield Renewable'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 Bottom Line On Brookfield Renewable's P/S
Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that Brookfield Renewable currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Brookfield Renewable (2 don't sit too well with us!) that you should be aware of before investing here.
If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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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.