Revenues Tell The Story For Waldencast plc (NASDAQ:WALD) As Its Stock Soars 33%

Waldencast plc (NASDAQ:WALD) shares have continued their recent momentum with a 33% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 22% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Waldencast's price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S in the United States' Personal Products industry is similar at about 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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See our latest analysis for Waldencast

What Does Waldencast's Recent Performance Look Like?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Waldencast has been doing quite well of late. Perhaps the market is expecting its current strong performance to taper off in accordance to the rest of the industry, which has kept the P/S contained. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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What Are Revenue Growth Metrics Telling Us About The P/S?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 4.6% during the coming year according to the six analysts following the company. That's shaping up to be similar to the 5.1% growth forecast for the broader industry.

With this in mind, it makes sense that Waldencast's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

Its shares have lifted substantially and now Waldencast's P/S is back within range of the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've seen that Waldencast maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Having said that, be aware Waldencast is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious.

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