CaliberCos Inc.'s (NASDAQ:CWD) Share Price Boosted 37% But Its Business Prospects Need A Lift Too

CaliberCos Inc. (NASDAQ:CWD) shareholders would be excited to see that the share price has had a great month, posting a 37% gain and recovering from prior weakness. But the last month did very little to improve the 53% share price decline over the last year.

Even after such a large jump in price, CaliberCos may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Capital Markets industry in the United States have P/S ratios greater than 3.3x and even P/S higher than 9x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for CaliberCos

How CaliberCos Has Been Performing

CaliberCos could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think CaliberCos' future stacks up against the industry? In that case, our free report is a great place to start.

How Is CaliberCos' Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like CaliberCos' to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 25%. Still, the latest three year period has seen an excellent 56% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 52% during the coming year according to the dual analysts following the company. Meanwhile, the broader industry is forecast to expand by 10%, which paints a poor picture.

With this in consideration, we find it intriguing that CaliberCos' P/S is closely matching its industry peers. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does CaliberCos' P/S Mean For Investors?

Shares in CaliberCos have risen appreciably however, its P/S is still subdued. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of CaliberCos' analyst forecasts revealed that its outlook for shrinking revenue is contributing to its low P/S. As other companies in the industry are forecasting revenue growth, CaliberCos' poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 3 warning signs for CaliberCos that we have uncovered.

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.