Despite an already strong run, CarParts.com, Inc. (NASDAQ:PRTS) shares have been powering on, with a gain of 29% in the last thirty days. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 59% share price drop in the last twelve months.
Even after such a large jump in price, you could still be forgiven for feeling indifferent about CarParts.com's P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in the United States is also close to 0.4x. 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 CarParts.com Has Been Performing
CarParts.com could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on analyst estimates for the company? Then our free report on CarParts.com will help you uncover what's on the horizon.
How Is CarParts.com's Revenue Growth Trending?
In order to justify its P/S ratio, CarParts.com would need to produce growth that's similar to the industry.
Retrospectively, the last year delivered a frustrating 9.2% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 8.5% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.
Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 0.9% over the next year. That's not great when the rest of the industry is expected to grow by 4.3%.
With this in consideration, we think it doesn't make sense that CarParts.com's P/S is closely matching its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.
The Key Takeaway
Its shares have lifted substantially and now CarParts.com's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
Our check of CarParts.com'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 we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.
Before you take the next step, you should know about the 2 warning signs for CarParts.com that we have uncovered.
If these risks are making you reconsider your opinion on CarParts.com, explore our interactive list of high quality stocks to get an idea of what else is out there.
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.
儘管已經有強勁的運行,CarParts.com, Inc. (納斯達克:PRTS) 的股票仍在持續上漲,在過去三十天內上漲了29%。不過,30天的跳漲並沒有改變長期股東在過去12個月中股價下跌59%所帶來的慘痛事實。
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