Sunlight Financial Holdings Inc. (NYSE:SUNL) Not Doing Enough For Some Investors As Its Shares Slump 26%

Unfortunately for some shareholders, the Sunlight Financial Holdings Inc. (NYSE:SUNL) share price has dived 26% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 93% loss during that time.

After such a large drop in price, considering around half the companies operating in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") above 0.8x, you may consider Sunlight Financial Holdings as an solid investment opportunity with its 0.2x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Sunlight Financial Holdings

What Does Sunlight Financial Holdings' P/S Mean For Shareholders?

Sunlight Financial Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Any Revenue Growth Forecasted For Sunlight Financial Holdings?

The only time you'd be truly comfortable seeing a P/S as low as Sunlight Financial Holdings' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 16% last year. The strong recent performance means it was also able to grow revenue by 137% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 5.4% each year as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 13% per annum, which is noticeably more attractive.

In light of this, it's understandable that Sunlight Financial Holdings' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Sunlight Financial Holdings' P/S

Sunlight Financial Holdings' recently weak share price has pulled its P/S back below other Consumer Finance 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 Sunlight Financial Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Sunlight Financial Holdings (1 is a bit unpleasant) you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.