Stock Analysis

Guild Holdings Company (NYSE:GHLD) Could Be Riskier Than It Looks

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Guild Holdings Company's (NYSE:GHLD) price-to-sales (or "P/S") ratio of 0.8x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Diversified Financial industry in the United States have P/S ratios greater than 2.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Guild Holdings

NYSE:GHLD Price to Sales Ratio vs Industry October 24th 2023

How Has Guild Holdings Performed Recently?

Guild 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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

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

Is There Any Revenue Growth Forecasted For Guild Holdings?

In order to justify its P/S ratio, Guild Holdings would need to produce sluggish growth that's trailing 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 50%. As a result, revenue from three years ago have also fallen 31% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 5.7% over the next year. With the industry predicted to deliver 4.0% growth , the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Guild Holdings' P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Guild Holdings' 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 seen that Guild Holdings currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 2 warning signs for Guild Holdings (1 is concerning!) that we have uncovered.

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).

Valuation is complex, but we're helping make it simple.

Find out whether Guild Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.