It's Down 34% But iPower Inc. (NASDAQ:IPW) Could Be Riskier Than It Looks

iPower Inc. (NASDAQ:IPW) shares have had a horrible month, losing 34% after a relatively good period beforehand. The good news is that in the last year, the stock has shone bright like a diamond, gaining 138%.

Since its price has dipped substantially, given about half the companies operating in the United States' Trade Distributors industry have price-to-sales ratios (or "P/S") above 1.1x, you may consider iPower as an attractive investment with its 0.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for iPower

How Has iPower Performed Recently?

While the industry has experienced revenue growth lately, iPower's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

How Is iPower's Revenue Growth Trending?

iPower's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered a frustrating 3.2% decrease to the company's top line. Even so, admirably revenue has lifted 59% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 7.2% during the coming year according to the lone analyst following the company. That's shaping up to be materially higher than the 4.9% growth forecast for the broader industry.

In light of this, it's peculiar that iPower's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On iPower's P/S

iPower's recently weak share price has pulled its P/S back below other Trade Distributors companies. 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.

A look at iPower's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

There are also other vital risk factors to consider and we've discovered 4 warning signs for iPower (2 are concerning!) that you should be aware of before investing here.

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.