Dave Inc.'s (NASDAQ:DAVE) P/S Is Still On The Mark Following 48% Share Price Bounce

Dave Inc. (NASDAQ:DAVE) shareholders would be excited to see that the share price has had a great month, posting a 48% gain and recovering from prior weakness. The annual gain comes to 132% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, when almost half of the companies in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") below 1.5x, you may consider Dave as a stock not worth researching with its 4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

We've discovered 1 warning sign about Dave. View them for free.

Check out our latest analysis for Dave

How Has Dave Performed Recently?

Recent times have been advantageous for Dave as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might 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 Dave.

Is There Enough Revenue Growth Forecasted For Dave?

The only time you'd be truly comfortable seeing a P/S as steep as Dave's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The latest three year period has also seen an excellent 127% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 18% per annum during the coming three years according to the eight analysts following the company. That's shaping up to be materially higher than the 14% each year growth forecast for the broader industry.

With this information, we can see why Dave is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

The strong share price surge has lead to Dave's P/S soaring as well. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Dave shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Dave that you should be aware of.

If these risks are making you reconsider your opinion on Dave, 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.