Cardlytics, Inc. (NASDAQ:CDLX) shareholders are no doubt pleased to see that the share price has bounced 29% 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 66% share price drop in the last twelve months.
In spite of the firm bounce in price, there still wouldn't be many who think Cardlytics' price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S in the United States' Media industry is similar at about 1x. 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.
How Has Cardlytics Performed Recently?
Recent revenue growth for Cardlytics has been in line with the industry. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.
If you'd like to see what analysts are forecasting going forward, you should check out our free report on Cardlytics.
Is There Some Revenue Growth Forecasted For Cardlytics?
The only time you'd be comfortable seeing a P/S like Cardlytics' is when the company's growth is tracking the industry closely.
Taking a look back first, we see that the company managed to grow revenues by a handy 3.1% last year. The latest three year period has also seen an excellent 36% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 3.4% each year over the next three years. Meanwhile, the rest of the industry is forecast to expand by 5.3% per year, which is not materially different.
In light of this, it's understandable that Cardlytics' P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.
What Does Cardlytics' P/S Mean For Investors?
Its shares have lifted substantially and now Cardlytics' P/S is back within range of the industry median. 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.
Our look at Cardlytics' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.
It is also worth noting that we have found 3 warning signs for Cardlytics (1 is a bit unpleasant!) that you need to take into consideration.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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