Revenues Not Telling The Story For PLBY Group, Inc. (NASDAQ:PLBY) After Shares Rise 87%

Those holding PLBY Group, Inc. (NASDAQ:PLBY) shares would be relieved that the share price has rebounded 87% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 73% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think PLBY Group's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in the United States' Luxury industry is similar at about 0.8x. 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 PLBY Group

How PLBY Group Has Been Performing

PLBY Group 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 might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think PLBY Group's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

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

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 2.7%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 88% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the three analysts covering the company suggest revenue growth is heading into negative territory, declining 17% each year over the next three years. Meanwhile, the broader industry is forecast to expand by 8.7% each year, which paints a poor picture.

With this in consideration, we think it doesn't make sense that PLBY Group's P/S is closely matching its industry peers. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Key Takeaway

Its shares have lifted substantially and now PLBY Group's P/S is back within range of the industry median. 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.

It appears that PLBY Group currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

It is also worth noting that we have found 9 warning signs for PLBY Group (4 make us uncomfortable!) that you need to take into consideration.

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).

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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.