Live Ventures Incorporated (NASDAQ:LIVE) Stock's 34% Dive Might Signal An Opportunity But It Requires Some Scrutiny

The Live Ventures Incorporated (NASDAQ:LIVE) share price has softened a substantial 34% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 32% in that time.

Although its price has dipped substantially, there still wouldn't be many who think Live Ventures' price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in the United States' Consumer Durables industry is similar at about 0.5x. 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.

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See our latest analysis for Live Ventures

How Live Ventures Has Been Performing

Revenue has risen at a steady rate over the last year for Live Ventures, which is generally not a bad outcome. One possibility is that the P/S is moderate because investors think this good revenue growth might only be parallel to the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Live Ventures' earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Live Ventures?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Live Ventures' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.5% last year. Pleasingly, revenue has also lifted 60% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 2.7% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it interesting that Live Ventures is trading at a fairly similar P/S compared to the industry. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Live Ventures' P/S?

Following Live Ventures' share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We didn't quite envision Live Ventures' P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

You should always think about risks. Case in point, we've spotted 4 warning signs for Live Ventures you should be aware of, and 3 of them make us uncomfortable.

If you're unsure about the strength of Live Ventures' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.