Despite an already strong run, 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) shares have been powering on, with a gain of 25% in the last thirty days. Looking further back, the 13% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, it's still not a stretch to say that 1-800-FLOWERS.COM's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Specialty Retail industry in the United States, seeing as it matches the P/S ratio of the wider industry. 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.

See our latest analysis for 1-800-FLOWERS.COM

How 1-800-FLOWERS.COM Has Been Performing

1-800-FLOWERS.COM 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. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, 1-800-FLOWERS.COM would need to produce growth that's similar to 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 9.9%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 25% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to slump, contracting by 2.6% during the coming year according to the four analysts following the company. With the industry predicted to deliver 5.4% growth, that's a disappointing outcome.

In light of this, it's somewhat alarming that 1-800-FLOWERS.COM's P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Final Word

1-800-FLOWERS.COM's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the 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.

Our check of 1-800-FLOWERS.COM's 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.

Having said that, be aware 1-800-FLOWERS.COM is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on 1-800-FLOWERS.COM, 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.