Eightco Holdings Inc. (NASDAQ:OCTO) Stock's 47% Dive Might Signal An Opportunity But It Requires Some Scrutiny

To the annoyance of some shareholders, Eightco Holdings Inc. (NASDAQ:OCTO) shares are down a considerable 47% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 63% share price decline.

Since its price has dipped substantially, when close to half the companies operating in the United States' Packaging industry have price-to-sales ratios (or "P/S") above 0.9x, you may consider Eightco Holdings as an enticing stock to check out with its 0.2x 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 limited.

See our latest analysis for Eightco Holdings

What Does Eightco Holdings' Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Eightco Holdings has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Eightco Holdings will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Eightco Holdings' earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Eightco Holdings would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 57%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 2.0%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's peculiar that Eightco Holdings' P/S sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Eightco Holdings' P/S

The southerly movements of Eightco Holdings' shares means its P/S is now sitting at a pretty low level. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We're very surprised to see Eightco Holdings currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 5 warning signs for Eightco Holdings (4 are significant!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.