Slammed 26% IZEA Worldwide, Inc. (NASDAQ:IZEA) Screens Well Here But There Might Be A Catch

IZEA Worldwide, Inc. (NASDAQ:IZEA) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 28% share price drop.

Even after such a large drop in price, it's still not a stretch to say that IZEA Worldwide's price-to-sales (or "P/S") ratio of 0.8x 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. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

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View our latest analysis for IZEA Worldwide

How Has IZEA Worldwide Performed Recently?

IZEA Worldwide could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on IZEA Worldwide .

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

In order to justify its P/S ratio, IZEA Worldwide would need to produce growth that's similar to the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Regardless, revenue has managed to lift by a handy 20% in aggregate from three years ago, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 20% over the next year. That's shaping up to be materially higher than the 12% growth forecast for the broader industry.

With this information, we find it interesting that IZEA Worldwide is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

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

With its share price dropping off a cliff, the P/S for IZEA Worldwide looks to be in line with the rest of the Interactive Media and Services industry. 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've established that IZEA Worldwide currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

There are also other vital risk factors to consider and we've discovered 3 warning signs for IZEA Worldwide (1 is a bit concerning!) that you should be aware of before investing here.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.