Even With A 26% Surge, Cautious Investors Are Not Rewarding Dingdong (Cayman) Limited's (NYSE:DDL) Performance Completely

Dingdong (Cayman) Limited (NYSE:DDL) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Looking further back, the 14% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Dingdong (Cayman)'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. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Dingdong (Cayman)

What Does Dingdong (Cayman)'s Recent Performance Look Like?

While the industry has experienced revenue growth lately, Dingdong (Cayman)'s revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dingdong (Cayman).

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 5.6% decrease to the company's top line. Even so, admirably revenue has lifted 42% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 9.9% over the next year. With the industry only predicted to deliver 4.8%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Dingdong (Cayman)'s P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Dingdong (Cayman)'s P/S

Dingdong (Cayman) appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Dingdong (Cayman) currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. 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. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

You always need to take note of risks, for example - Dingdong (Cayman) has 2 warning signs we think you should be aware of.

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.