Those holding Offerpad Solutions Inc. (NYSE:OPAD) shares would be relieved that the share price has rebounded 28% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios.    Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.  

In spite of the firm bounce in price, Offerpad Solutions may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 1.8x and even P/S higher than 10x are not unusual.   However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.  

Check out our latest analysis for Offerpad Solutions

NYSE:OPAD Price to Sales Ratio vs Industry November 29th 2023

What Does Offerpad Solutions' P/S Mean For Shareholders?

Offerpad Solutions could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth.   Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon.  So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.    

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

Is There Any Revenue Growth Forecasted For Offerpad Solutions?  

Offerpad Solutions' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than 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 58%.   Even so, admirably revenue has lifted 65% in aggregate from three years ago, notwithstanding the last 12 months.  Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.  

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 19% each year over the next three years.  Meanwhile, the rest of the industry is forecast to only expand by 11% per year, which is noticeably less attractive.

With this in consideration, we find it intriguing that Offerpad Solutions' P/S sits behind most of its industry peers.  Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.  

The Final Word

The latest share price surge wasn't enough to lift Offerpad Solutions' P/S close to the industry median.      Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A look at Offerpad Solutions' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.    

And what about other risks? Every company has them, and we've spotted   3 warning signs for Offerpad Solutions  (of which 1 is potentially serious!) you should know about.  

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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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.