Little Excitement Around Riskified Ltd.'s (NYSE:RSKD) Revenues As Shares Take 26% Pounding

Explore Riskified's Fair Values from the Community and select yours

Riskified Ltd. (NYSE:RSKD) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 13% in that time.

Since its price has dipped substantially, Riskified may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.9x, since almost half of all companies in the Software industry in the United States have P/S ratios greater than 4.8x and even P/S higher than 11x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Riskified

How Has Riskified Performed Recently?

With revenue growth that's inferior to most other companies of late, Riskified has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Riskified will help you uncover what's on the horizon.

How Is Riskified's Revenue Growth Trending?

In order to justify its P/S ratio, Riskified would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.0%. This was backed up an excellent period prior to see revenue up by 39% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 6.5% as estimated by the eight analysts watching the company. That's shaping up to be materially lower than the 20% growth forecast for the broader industry.

In light of this, it's understandable that Riskified's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Riskified's P/S

Riskified's P/S looks about as weak as its stock price lately. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Riskified maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Riskified with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.