Dingdong (Cayman) Limited (NYSE:DDL) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. For any long-term shareholders, the last month ends a year to forget by locking in a 65% share price decline.

In spite of the heavy fall in price, there still wouldn't be many who think Dingdong (Cayman)'s price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in the United States' Consumer Retailing industry is similar at about 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Dingdong (Cayman)

What Does Dingdong (Cayman)'s Recent Performance Look Like?

Dingdong (Cayman) 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. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

How Is Dingdong (Cayman)'s Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Dingdong (Cayman)'s to be considered reasonable.

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 9.9%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 87% in total over the last three years. 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 six analysts covering the company suggest revenue should grow by 1.6% over the next year. That's shaping up to be materially lower than the 3.7% growth forecast for the broader industry.

With this information, we find it interesting that Dingdong (Cayman) is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What Does Dingdong (Cayman)'s P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Dingdong (Cayman) looks to be in line with the rest of the Consumer Retailing industry. 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.

Our look at the analysts forecasts of Dingdong (Cayman)'s revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Dingdong (Cayman) with six simple checks will allow you to discover any risks that could be an issue.

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.