IZEA Worldwide, Inc. (NASDAQ:IZEA) shareholders would be excited to see that the share price has had a great month, posting a 27% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about IZEA Worldwide's P/S ratio of 1.3x, since the median price-to-sales (or "P/S") ratio for the Interactive Media and Services industry in the United States is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does IZEA Worldwide's P/S Mean For Shareholders?

IZEA Worldwide could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

How Is IZEA Worldwide's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like IZEA Worldwide's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 16% decrease to the company's top line. Still, the latest three year period has seen an excellent 49% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 37% over the next year. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.

In light of this, it's curious that IZEA Worldwide's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does IZEA Worldwide's P/S Mean For Investors?

Its shares have lifted substantially and now IZEA Worldwide'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.

We've established that IZEA Worldwide currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for IZEA Worldwide you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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