Offerpad Solutions Inc.'s (NYSE:OPAD) Shares Leap 54% Yet They're Still Not Telling The Full Story

Offerpad Solutions Inc. (NYSE:OPAD) shareholders are no doubt pleased to see that the share price has bounced 54% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 58% share price drop in the last twelve months.

In spite of the firm bounce in price, Offerpad Solutions' price-to-sales (or "P/S") ratio of 0.1x might still make it look like a strong buy right now compared to the wider Real Estate industry in the United States, where around half of the companies have P/S ratios above 2.3x and even P/S above 9x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Offerpad Solutions

How Offerpad Solutions Has Been Performing

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.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 57% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 5.7% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 16% per year as estimated by the five analysts watching the company. With the industry only predicted to deliver 11% per annum, the company is positioned for a stronger revenue result.

With this information, we find it odd that Offerpad Solutions is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

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.

To us, it seems Offerpad Solutions 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. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

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

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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