WW International, Inc. (NASDAQ:WW) Not Doing Enough For Some Investors As Its Shares Slump 26%

Unfortunately for some shareholders, the WW International, Inc. (NASDAQ:WW) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 13% in that time.

Since its price has dipped substantially, it would be understandable if you think WW International is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.3x, considering almost half the companies in the United States' Consumer Services industry have P/S ratios above 1.4x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for WW International

How Has WW International Performed Recently?

While the industry has experienced revenue growth lately, WW International's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as WW International's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 7.4% each year as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 12% per year, which is noticeably more attractive.

In light of this, it's understandable that WW International's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On WW International's P/S

The southerly movements of WW International's shares means its P/S is now sitting at a pretty low level. 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.

As we suspected, our examination of WW International's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 4 warning signs for WW International you should be aware of, and 1 of them shouldn't be ignored.

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.