There's Reason For Concern Over 1-800-FLOWERS.COM, Inc.'s (NASDAQ:FLWS) Price

There wouldn't be many who think 1-800-FLOWERS.COM, Inc.'s (NASDAQ:FLWS) price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S for the Specialty Retail industry in the United States is similar at about 0.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

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See our latest analysis for 1-800-FLOWERS.COM

What Does 1-800-FLOWERS.COM's Recent Performance Look Like?

While the industry has experienced revenue growth lately, 1-800-FLOWERS.COM's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on 1-800-FLOWERS.COM.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like 1-800-FLOWERS.COM's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 8.5%. The last three years don't look nice either as the company has shrunk revenue by 23% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 2.4% as estimated by the three analysts watching the company. That's not great when the rest of the industry is expected to grow by 5.6%.

In light of this, it's somewhat alarming that 1-800-FLOWERS.COM's P/S sits in line with the majority of other companies. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

The Key Takeaway

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.

Our check of 1-800-FLOWERS.COM's analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. With this in mind, we don't feel the current P/S is justified as declining revenues are unlikely to support a more positive sentiment for long. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

And what about other risks? Every company has them, and we've spotted 1 warning sign for 1-800-FLOWERS.COM you should know about.

If these risks are making you reconsider your opinion on 1-800-FLOWERS.COM, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.