Market Might Still Lack Some Conviction On loanDepot, Inc. (NYSE:LDI) Even After 84% Share Price Boost

loanDepot, Inc. (NYSE:LDI) shares have continued their recent momentum with a 84% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

In spite of the firm bounce in price, loanDepot may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Diversified Financial industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 5x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Check out our latest analysis for loanDepot

What Does loanDepot's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, loanDepot has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For loanDepot?

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

Taking a look back first, we see that the company grew revenue by an impressive 27% last year. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 54% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 15% over the next year. That's shaping up to be materially higher than the 5.3% growth forecast for the broader industry.

With this in consideration, we find it intriguing that loanDepot's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

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

loanDepot's recent share price jump still sees fails to bring its P/S alongside the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

loanDepot's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 2 warning signs for loanDepot (of which 1 is potentially serious!) you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.