The Lulu's Fashion Lounge Holdings, Inc. (NASDAQ:LVLU) share price has fared very poorly over the last month, falling by a substantial 33%.    The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 72% loss during that time.  

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Lulu's Fashion Lounge Holdings' P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in the United States is also close to 0.4x.  However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.    

See our latest analysis for Lulu's Fashion Lounge Holdings

NasdaqGM:LVLU Price to Sales Ratio vs Industry November 16th 2023

What Does Lulu's Fashion Lounge Holdings' Recent Performance Look Like?

Lulu's Fashion Lounge Holdings 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.   One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around.  If not, then existing shareholders may be a little nervous about the viability of the share price.    

Want the full picture on analyst estimates for the company? Then our free report on Lulu's Fashion Lounge Holdings will help you uncover what's on the horizon.  

Is There Some Revenue Growth Forecasted For Lulu's Fashion Lounge Holdings?  

Lulu's Fashion Lounge Holdings' 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.  

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%.   Even so, admirably revenue has lifted 34% in aggregate from three years ago, notwithstanding the last 12 months.  Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.  

Looking ahead now, revenue is anticipated to slump, contracting by 2.5% during the coming year according to the six analysts following the company.  That's not great when the rest of the industry is expected to grow by 6.3%.

With this in consideration, we think it doesn't make sense that Lulu's Fashion Lounge Holdings' P/S is closely matching its industry peers.  It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen.  Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.  

What Does Lulu's Fashion Lounge Holdings' P/S Mean For Investors?

Following Lulu's Fashion Lounge Holdings' share price tumble, its P/S is just clinging on to the industry median P/S.      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 check of Lulu's Fashion Lounge Holdings' analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted.  With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long.  If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for Lulu's Fashion Lounge Holdings that you need to be mindful of.  

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.