Improved Revenues Required Before Offerpad Solutions Inc. (NYSE:OPAD) Stock's 336% Jump Looks Justified

Offerpad Solutions Inc. (NYSE:OPAD) shareholders have had their patience rewarded with a 336% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

Although its price has surged higher, Offerpad Solutions may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 2.9x and even P/S higher than 10x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

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See our latest analysis for Offerpad Solutions

What Does Offerpad Solutions' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Offerpad Solutions' revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Offerpad Solutions?

The only time you'd be truly comfortable seeing a P/S as depressed as Offerpad Solutions' is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 30% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 82% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 11% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 14%, which is noticeably more attractive.

With this in consideration, its clear as to why Offerpad Solutions' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Offerpad Solutions' P/S Mean For Investors?

Shares in Offerpad Solutions have risen appreciably however, its P/S is still subdued. 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.

As we suspected, our examination of Offerpad Solutions' analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Offerpad Solutions you should be aware of, and 1 of them is concerning.

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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.