a.k.a. Brands Holding Corp. (NYSE:AKA) shareholders would be excited to see that the share price has had a great month, posting a 36% gain and recovering from prior weakness. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 65% share price drop in the last twelve months.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about a.k.a. Brands Holding'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 0.3x. 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.

Check out our latest analysis for a.k.a. Brands Holding

How a.k.a. Brands Holding Has Been Performing

a.k.a. Brands Holding could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Some Revenue Growth Forecasted For a.k.a. Brands Holding?

a.k.a. Brands Holding's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with 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 15%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 153% in total over the last three years. 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 4.6% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 7.1% per year, which is noticeably more attractive.

With this in mind, we find it intriguing that a.k.a. Brands Holding's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On a.k.a. Brands Holding's P/S

Its shares have lifted substantially and now a.k.a. Brands Holding's P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

When you consider that a.k.a. Brands Holding's revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. 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. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

It is also worth noting that we have found 3 warning signs for a.k.a. Brands Holding (1 is a bit unpleasant!) that you need to take into consideration.

If these risks are making you reconsider your opinion on a.k.a. Brands Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.