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- NYSE:AKA
There's Reason For Concern Over a.k.a. Brands Holding Corp.'s (NYSE:AKA) Massive 32% Price Jump
The a.k.a. Brands Holding Corp. (NYSE:AKA) share price has done very well over the last month, posting an excellent gain of 32%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 22% over that time.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about a.k.a. Brands Holding's P/S ratio of 0.3x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in the United States is also close to 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.
Check out our latest analysis for a.k.a. Brands Holding
How Has a.k.a. Brands Holding Performed Recently?
While the industry has experienced revenue growth lately, a.k.a. Brands Holding'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.
Keen to find out how analysts think a.k.a. Brands Holding's future stacks up against the industry? In that case, our free report is a great place to start.How Is a.k.a. Brands Holding's Revenue Growth Trending?
a.k.a. Brands Holding's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. Even so, admirably revenue has lifted 153% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.
Turning to the outlook, the next three years should generate growth of 4.0% per year as estimated by the five analysts watching the company. With the industry predicted to deliver 6.5% growth per annum, the company is positioned for a weaker revenue result.
In light of this, it's curious that a.k.a. Brands Holding's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.
What We Can Learn From a.k.a. Brands Holding's P/S?
a.k.a. Brands Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
Our look at the analysts forecasts of a.k.a. Brands Holding's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.
And what about other risks? Every company has them, and we've spotted 2 warning signs for a.k.a. Brands Holding you should know about.
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.
About NYSE:AKA
a.k.a. Brands Holding
Operates a portfolio of online fashion brands in the United States, Australia, and internationally.
Mediocre balance sheet and slightly overvalued.