Revenues Not Telling The Story For iPower Inc. (NASDAQ:IPW) After Shares Rise 249%

iPower Inc. (NASDAQ:IPW) shares have continued their recent momentum with a 249% gain in the last month alone. The annual gain comes to 191% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, it's still not a stretch to say that iPower's price-to-sales (or "P/S") ratio of 1x right now seems quite "middle-of-the-road" compared to the Trade Distributors industry in the United States, seeing as it matches the P/S ratio of the wider industry. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for iPower

What Does iPower's Recent Performance Look Like?

iPower could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. 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 iPower will help you uncover what's on the horizon.

How Is iPower's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like iPower's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 2.7%. Pleasingly, revenue has also lifted 67% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to slump, contracting by 1.4% during the coming year according to the one analyst 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 iPower'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. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Bottom Line On iPower's P/S

iPower appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our check of iPower's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

Before you settle on your opinion, we've discovered 3 warning signs for iPower (1 can't be ignored!) that you should be aware 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com