The Real Brokerage Inc. (NASDAQ:REAX) Stock Rockets 25% But Many Are Still Ignoring The Company

Despite an already strong run, The Real Brokerage Inc. (NASDAQ:REAX) shares have been powering on, with a gain of 25% in the last thirty days. The annual gain comes to 256% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, Real Brokerage may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 1.9x and even P/S higher than 8x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Real Brokerage

How Has Real Brokerage Performed Recently?

With revenue growth that's superior to most other companies of late, Real Brokerage has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you 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.

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

How Is Real Brokerage's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Real Brokerage's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 81% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 32% 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 Real Brokerage's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From Real Brokerage's P/S?

The latest share price surge wasn't enough to lift Real Brokerage's P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To us, it seems Real Brokerage currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be 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 Real Brokerage that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.