Positive Sentiment Still Eludes Opendoor Technologies Inc. (NASDAQ:OPEN) Following 29% Share Price Slump

To the annoyance of some shareholders, Opendoor Technologies Inc. (NASDAQ:OPEN) shares are down a considerable 29% in the last month, which continues a horrid run for the company. Looking at the bigger picture, even after this poor month the stock is up 60% in the last year.

Since its price has dipped substantially, Opendoor Technologies may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 9x are not unusual. 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 Opendoor Technologies

What Does Opendoor Technologies' Recent Performance Look Like?

While the industry has experienced revenue growth lately, Opendoor Technologies' revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 55%. Even so, admirably revenue has lifted 169% 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 twelve analysts covering the company suggest revenue should grow by 15% per year over the next three years. With the industry only predicted to deliver 12% each year, the company is positioned for a stronger revenue result.

With this information, we find it odd that Opendoor Technologies is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Opendoor Technologies' P/S

Opendoor Technologies' recently weak share price has pulled its P/S back below other Real Estate companies. 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.

A look at Opendoor Technologies' revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Opendoor Technologies that you need to be mindful 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.