Open Lending Corporation's (NASDAQ:LPRO) Share Price Is Still Matching Investor Opinion Despite 27% Slump

The Open Lending Corporation (NASDAQ:LPRO) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 35% in that time.

In spite of the heavy fall in price, given around half the companies in the United States' Capital Markets industry have price-to-sales ratios (or "P/S") below 3x, you may still consider Open Lending as a stock to avoid entirely with its 5.5x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Open Lending

How Has Open Lending Performed Recently?

While the industry has experienced revenue growth lately, Open Lending's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Open Lending.

How Is Open Lending's Revenue Growth Trending?

In order to justify its P/S ratio, Open Lending would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 53% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the nine analysts following the company. With the industry only predicted to deliver 4.8%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Open Lending's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

A significant share price dive has done very little to deflate Open Lending's very lofty P/S. 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 Open Lending maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Capital Markets industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 1 warning sign for Open Lending that we have uncovered.

If you're unsure about the strength of Open Lending's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.