Lifetime Brands, Inc.'s (NASDAQ:LCUT) Price Is Right But Growth Is Lacking After Shares Rocket 32%

Those holding Lifetime Brands, Inc. (NASDAQ:LCUT) shares would be relieved that the share price has rebounded 32% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 39% over that time.

In spite of the firm bounce in price, given about half the companies operating in the United States' Consumer Durables industry have price-to-sales ratios (or "P/S") above 0.6x, you may still consider Lifetime Brands as an attractive investment with its 0.1x 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.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

View our latest analysis for Lifetime Brands

How Lifetime Brands Has Been Performing

Lifetime Brands 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 seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as Lifetime Brands' is when the company's growth is on track to lag 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 1.8%. The last three years don't look nice either as the company has shrunk revenue by 15% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 1.8% per year during the coming three years according to the two analysts following the company. With the industry predicted to deliver 5.1% growth each year, the company is positioned for a weaker revenue result.

With this information, we can see why Lifetime Brands is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Despite Lifetime Brands' share price climbing recently, its P/S still lags most other companies. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Lifetime Brands' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Lifetime Brands, and understanding them should be part of your investment process.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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.