Slammed 28% Huddled Group Plc (LON:HUD) Screens Well Here But There Might Be A Catch

Huddled Group Plc (LON:HUD) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 28% in that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Huddled Group's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in the United Kingdom 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.

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View our latest analysis for Huddled Group

What Does Huddled Group's Recent Performance Look Like?

Huddled Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Huddled Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Huddled Group?

In order to justify its P/S ratio, Huddled Group would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 142% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 35% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 2.9% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Huddled Group's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From Huddled Group's P/S?

With its share price dropping off a cliff, the P/S for Huddled Group looks to be in line with the rest of the Specialty Retail industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Huddled Group currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for Huddled Group that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.