Improved Revenues Required Before Katapult Holdings, Inc. (NASDAQ:KPLT) Stock's 27% Jump Looks Justified

Katapult Holdings, Inc. (NASDAQ:KPLT) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 36%.

Although its price has surged higher, it would still be understandable if you think Katapult Holdings 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 Finance industry have P/S ratios above 1.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Katapult Holdings

How Has Katapult Holdings Performed Recently?

Katapult Holdings hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Katapult Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 9.4%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 13% over the next year. That's shaping up to be materially lower than the 34% growth forecast for the broader industry.

In light of this, it's understandable that Katapult Holdings' P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Katapult Holdings' P/S

Despite Katapult Holdings' share price climbing recently, its P/S still lags most other 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.

We've established that Katapult Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 6 warning signs for Katapult Holdings (2 are concerning!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.