Solo Brands, Inc.'s (NYSE:DTC) Shares Not Telling The Full Story

When close to half the companies operating in the Leisure industry in the United States have price-to-sales ratios (or "P/S") above 1x, you may consider Solo Brands, Inc. (NYSE:DTC) as an attractive investment with its 0.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Solo Brands

How Solo Brands Has Been Performing

The recently shrinking revenue for Solo Brands has been in line with the industry. Perhaps the market is expecting future revenue performance to deteriorate further, which has kept the P/S suppressed. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. At the very least, you'd be hoping that revenue doesn't fall off a cliff if your plan is to pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Solo Brands will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Solo Brands?

In order to justify its P/S ratio, Solo Brands would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.6%. Still, the latest three year period has seen an excellent 62% overall rise in revenue, in spite of its unsatisfying short-term performance. 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.

Turning to the outlook, the next three years should generate growth of 4.3% per year as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 3.5% each year, which is not materially different.

With this information, we find it odd that Solo Brands is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Solo Brands' 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.

Our examination of Solo Brands' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 2 warning signs for Solo Brands that you need to take into consideration.

If these risks are making you reconsider your opinion on Solo Brands, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.