PLBY Group, Inc. (NASDAQ:PLBY) Stock Rockets 87% As Investors Are Less Pessimistic Than Expected
PLBY Group, Inc. (NASDAQ:PLBY) shareholders are no doubt pleased to see that the share price has bounced 87% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 73% share price drop in the last twelve months.
In spite of the firm bounce in price, it's still not a stretch to say that PLBY Group's price-to-sales (or "P/S") ratio of 0.3x right now seems quite "middle-of-the-road" compared to the Luxury industry in the United States, where the median P/S ratio is around 0.8x. 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.
See our latest analysis for PLBY Group
What Does PLBY Group's Recent Performance Look Like?
PLBY Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.
Keen to find out how analysts think PLBY Group's future stacks up against the industry? In that case, our free report is a great place to start.
How Is PLBY Group's Revenue Growth Trending?
The only time you'd be comfortable seeing a P/S like PLBY Group's is when the company's growth is tracking the industry closely.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.7%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 88% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.
Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 17% each year over the next three years. That's not great when the rest of the industry is expected to grow by 8.7% per year.
With this in consideration, we think it doesn't make sense that PLBY Group's P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.
The Bottom Line On PLBY Group's P/S
Its shares have lifted substantially and now PLBY Group's P/S is back within range of the industry median. 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 check of PLBY Group's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.
It is also worth noting that we have found 9 warning signs for PLBY Group (4 are a bit concerning!) that you need to take into consideration.
If you're unsure about the strength of PLBY Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
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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.
