Positive Sentiment Still Eludes Dingdong (Cayman) Limited (NYSE:DDL) Following 25% Share Price Slump

Dingdong (Cayman) Limited (NYSE:DDL) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. Of course, over the longer-term many would still wish they owned shares as the stock's price has soared 137% in the last twelve months.

Although its price has dipped substantially, 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 P/S Mean For Shareholders?

There hasn't been much to differentiate Dingdong (Cayman)'s and the industry's revenue growth lately. It seems that many are expecting the mediocre revenue performance to persist, which has held the P/S ratio back. Those who are bullish on Dingdong (Cayman) will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

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

Is There Some Revenue Growth Forecasted For Dingdong (Cayman)?

In order to justify its P/S ratio, Dingdong (Cayman) would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.6% last year. The latest three year period has also seen a 24% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the five analysts following the company. That's shaping up to be materially higher than the 4.7% growth forecast for the broader industry.

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

With its share price dropping off a cliff, the P/S for Dingdong (Cayman) looks to be in line with the rest of the Consumer Retailing industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Dingdong (Cayman)'s analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Having said that, be aware Dingdong (Cayman) is showing 1 warning sign in our investment analysis, you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.