Unfortunately for some shareholders, the Waldencast plc (NASDAQ:WALD) share price has dived 29% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 52% share price decline.

Although its price has dipped substantially, you could still be forgiven for thinking Waldencast is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.5x, considering almost half the companies in the United States' Personal Products industry have P/S ratios below 1.8x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

What Does Waldencast's P/S Mean For Shareholders?

Waldencast certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Waldencast?

In order to justify its P/S ratio, Waldencast would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 31%. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 20% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 7.9%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Waldencast's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Waldencast's P/S Mean For Investors?

Despite the recent share price weakness, Waldencast's P/S remains higher than most other companies in the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Waldencast's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 2 warning signs for Waldencast (1 is a bit concerning!) that you need to take into consideration.

If you're unsure about the strength of Waldencast'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.