Revenues Working Against KinderCare Learning Companies, Inc.'s (NYSE:KLC) Share Price Following 31% Dive

To the annoyance of some shareholders, KinderCare Learning Companies, Inc. (NYSE:KLC) shares are down a considerable 31% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 84% loss during that time.

Following the heavy fall in price, when close to half the companies operating in the United States' Consumer Services industry have price-to-sales ratios (or "P/S") above 1.4x, you may consider KinderCare Learning Companies as an enticing stock to check out with its 0.2x 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.

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Check out our latest analysis for KinderCare Learning Companies

How KinderCare Learning Companies Has Been Performing

KinderCare Learning Companies could be doing better as it's been growing revenue less than most other companies lately. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

How Is KinderCare Learning Companies' Revenue Growth Trending?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 30% overall rise in revenue, in spite of its uninspiring short-term performance. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Turning to the outlook, the next year should generate growth of 2.4% as estimated by the seven analysts watching the company. With the industry predicted to deliver 10% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why KinderCare Learning Companies' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does KinderCare Learning Companies' P/S Mean For Investors?

KinderCare Learning Companies' recently weak share price has pulled its P/S back below other Consumer Services companies. 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.

As expected, our analysis of KinderCare Learning Companies' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 1 warning sign for KinderCare Learning Companies that you need to be mindful of.

If these risks are making you reconsider your opinion on KinderCare Learning Companies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.