Webuy Global Ltd (NASDAQ:WBUY) Might Not Be As Mispriced As It Looks After Plunging 70%

Webuy Global Ltd (NASDAQ:WBUY) shareholders that were waiting for something to happen have been dealt a blow with a 70% share price drop in the last month. To make matters worse, the recent drop has wiped out a year's worth of gains with the share price now back where it started a year ago.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Webuy Global's P/S ratio of 0.2x, since the median price-to-sales (or "P/S") ratio for the Consumer Retailing industry in the United States is also close to 0.4x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Webuy Global

What Does Webuy Global's P/S Mean For Shareholders?

Webuy Global certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Some Revenue Growth Forecasted For Webuy Global?

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

Taking a look back first, we see that the company grew revenue by an impressive 38% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 139,168% over the next year. With the industry only predicted to deliver 5.4%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Webuy Global is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

With its share price dropping off a cliff, the P/S for Webuy Global looks to be in line with the rest of the Consumer Retailing industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Despite enticing revenue growth figures that outpace the industry, Webuy Global's P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 2 warning signs for Webuy Global (1 is potentially serious!) that we have uncovered.

If you're unsure about the strength of Webuy Global's 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com