There Is A Reason eXp World Holdings, Inc.'s (NASDAQ:EXPI) Price Is Undemanding

With a price-to-sales (or "P/S") ratio of 0.4x eXp World Holdings, Inc. (NASDAQ:EXPI) may be sending bullish signals at the moment, given that almost half of all the Real Estate companies in the United States have P/S ratios greater than 2.2x and even P/S higher than 9x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for eXp World Holdings

How eXp World Holdings Has Been Performing

With revenue growth that's inferior to most other companies of late, eXp World Holdings has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

How Is eXp World Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like eXp World Holdings' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.4% last year. Pleasingly, revenue has also lifted 61% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 7.0% over the next year. Meanwhile, the rest of the industry is forecast to expand by 16%, which is noticeably more attractive.

With this information, we can see why eXp World Holdings is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From eXp World Holdings' P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of eXp World Holdings' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with eXp World Holdings, and understanding them should be part of your investment process.

If you're unsure about the strength of eXp World Holdings' 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.