CarParts.com, Inc. (NASDAQ:PRTS) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 36% share price drop.

Although its price has dipped substantially, there still wouldn't be many who think CarParts.com's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when it essentially matches the median P/S in the United States' Specialty Retail industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for CarParts.com

How Has CarParts.com Performed Recently?

There hasn't been much to differentiate CarParts.com's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. If this is the case, then at least existing shareholders won't be losing sleep over the current share price.

How Is CarParts.com's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 4.5%. Pleasingly, revenue has also lifted 74% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 10% per annum as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 7.1% per annum growth forecast for the broader industry.

With this information, we find it interesting that CarParts.com is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

With its share price dropping off a cliff, the P/S for CarParts.com looks to be in line with the rest of the Specialty Retail industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Despite enticing revenue growth figures that outpace the industry, CarParts.com's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You should always think about risks. Case in point, we've spotted 1 warning sign for CarParts.com 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).

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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.