Revenues Working Against Wolverine World Wide, Inc.'s (NYSE:WWW) Share Price

When you see that almost half of the companies in the Luxury industry in the United States have price-to-sales ratios (or "P/S") above 0.8x, Wolverine World Wide, Inc. (NYSE:WWW) looks to be giving off some buy signals with its 0.3x 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.

Check out our latest analysis for Wolverine World Wide

How Wolverine World Wide Has Been Performing

While the industry has experienced revenue growth lately, Wolverine World Wide's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

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

There's an inherent assumption that a company should underperform the industry for P/S ratios like Wolverine World Wide's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. Regardless, revenue has managed to lift by a handy 26% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue growth is heading into negative territory, declining 13% over the next year. That's not great when the rest of the industry is expected to grow by 7.2%.

With this in consideration, we find it intriguing that Wolverine World Wide's P/S is closely matching its industry peers. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Final Word

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.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Wolverine World Wide's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Wolverine World Wide's poor outlook justifies its low P/S ratio. Unless there's material change, it's hard to envision a situation where the stock price will rise drastically.

You need to take note of risks, for example - Wolverine World Wide has 4 warning signs (and 2 which can't be ignored) we think you should know about.

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).

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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.