Further Upside For IZEA Worldwide, Inc. (NASDAQ:IZEA) Shares Could Introduce Price Risks After 30% Bounce

IZEA Worldwide, Inc. (NASDAQ:IZEA) shares have continued their recent momentum with a 30% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 43%.

In spite of the firm bounce in price, it's still not a stretch to say that IZEA Worldwide's price-to-sales (or "P/S") ratio of 1.6x right now seems quite "middle-of-the-road" compared to the Interactive Media and Services industry in the United States, where the median P/S ratio is around 1.2x. 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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Check out our latest analysis for IZEA Worldwide

How IZEA Worldwide Has Been Performing

With revenue growth that's inferior to most other companies of late, IZEA Worldwide has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 7.2%. The solid recent performance means it was also able to grow revenue by 11% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 15% over the next year. That's shaping up to be materially higher than the 12% growth forecast for the broader industry.

With this in consideration, we find it intriguing that IZEA Worldwide's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

IZEA Worldwide's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Looking at IZEA Worldwide's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Having said that, be aware IZEA Worldwide is showing 1 warning sign in our investment analysis, you should know about.

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

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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.