Market Might Still Lack Some Conviction On IZEA Worldwide, Inc. (NASDAQ:IZEA) Even After 32% Share Price Boost

Despite an already strong run, IZEA Worldwide, Inc. (NASDAQ:IZEA) shares have been powering on, with a gain of 32% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 32% in the last year.

Although its price has surged higher, it's still not a stretch to say that IZEA Worldwide's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Interactive Media and Services industry in the United States, seeing as it matches the P/S ratio of the wider industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for IZEA Worldwide

What Does IZEA Worldwide's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, IZEA Worldwide's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

How Is IZEA Worldwide's Revenue Growth Trending?

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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. Even so, admirably revenue has lifted 102% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 17% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

In light of this, it's curious that IZEA Worldwide's P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

What We Can Learn From IZEA Worldwide's P/S?

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. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 3 warning signs for IZEA Worldwide that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.