Sezzle Inc.'s (NASDAQ:SEZL) Stock Retreats 26% But Revenues Haven't Escaped The Attention Of Investors

The Sezzle Inc. (NASDAQ:SEZL) share price has fared very poorly over the last month, falling by a substantial 26%. The good news is that in the last year, the stock has shone bright like a diamond, gaining 198%.

In spite of the heavy fall in price, when almost half of the companies in the United States' Diversified Financial industry have price-to-sales ratios (or "P/S") below 2.5x, you may still consider Sezzle as a stock probably not worth researching with its 4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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See our latest analysis for Sezzle

How Sezzle Has Been Performing

With revenue growth that's superior to most other companies of late, Sezzle has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 70%. Pleasingly, revenue has also lifted 136% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 30% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 3.9% growth forecast for the broader industry.

With this information, we can see why Sezzle is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Sezzle's P/S?

Sezzle's P/S remain high even after its stock plunged. 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.

Our look into Sezzle 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. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 3 warning signs for Sezzle (1 is a bit concerning!) that you should be aware of before investing here.

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