Unfortunately for some shareholders, the Offerpad Solutions Inc. (NYSE:OPAD) share price has dived 34% in the last thirty days, prolonging recent pain.    Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 43% share price drop.  

Following the heavy fall in price, Offerpad Solutions may look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 2.3x and even P/S higher than 9x aren't out of the ordinary.   However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.  

NYSE:OPAD Price to Sales Ratio vs Industry May 31st 2024

How Offerpad Solutions Has Been Performing

Offerpad Solutions hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average.   The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better.  If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.    

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Offerpad Solutions.

Is There Any Revenue Growth Forecasted For Offerpad Solutions?  

In order to justify its P/S ratio, Offerpad Solutions would need to produce anemic growth that's substantially trailing the industry.  

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 69%.   Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time.  Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.  

Looking ahead now, revenue is anticipated to climb by 31% each year during the coming three years according to the five analysts following the company.  With the industry only predicted to deliver 12% per year, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Offerpad Solutions' P/S sits below the majority of other companies.  Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.  

What We Can Learn From Offerpad Solutions' P/S?

Having almost fallen off a cliff, Offerpad Solutions' share price has pulled its P/S way down as well.      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.

To us, it seems Offerpad Solutions currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.    

Don't forget that there may be other risks. For instance, we've identified   4 warning signs for Offerpad Solutions  that you should be aware of.  

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).

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.