With A 26% Price Drop For Funko, Inc. (NASDAQ:FNKO) You'll Still Get What You Pay For

Funko, Inc. (NASDAQ:FNKO) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Looking at the bigger picture, even after this poor month the stock is up 61% in the last year.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Funko's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Leisure industry in the United States is also close to 1x. 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.

Check out our latest analysis for Funko

What Does Funko's P/S Mean For Shareholders?

The recently shrinking revenue for Funko has been in line with the industry. It seems that few are expecting the company's revenue performance to deviate much from most other companies, which has held the P/S back. You'd much rather the company improve its revenue if you still believe in the business. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues tracking the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Funko.

Is There Some Revenue Growth Forecasted For Funko?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.0%. 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 14% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 3.1% during the coming year according to the two analysts following the company. That's shaping up to be similar to the 1.9% growth forecast for the broader industry.

In light of this, it's understandable that Funko's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does Funko's P/S Mean For Investors?

Following Funko's share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've seen that Funko maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Funko with six simple checks.

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).

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

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.