Caleres, Inc. (NYSE:CAL) shareholders are no doubt pleased to see that the share price has bounced 29% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 47% in the last twelve months.
Although its price has surged higher, there still wouldn't be many who think Caleres' price-to-sales (or "P/S") ratio of 0.2x is worth a mention when the median P/S in the United States' Specialty Retail industry is similar at about 0.5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
View our latest analysis for Caleres
Caleres hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on analyst estimates for the company? Then our free report on Caleres will help you uncover what's on the horizon.Caleres' 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.
Retrospectively, the last year delivered a frustrating 2.8% decrease to the company's top line. As a result, revenue from three years ago have also fallen 8.4% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.
Looking ahead now, revenue is anticipated to climb by 6.2% during the coming year according to the three analysts following the company. With the industry predicted to deliver 7.9% growth , the company is positioned for a comparable revenue result.
With this in mind, it makes sense that Caleres' P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.
Caleres' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
A Caleres' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Specialty Retail industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.
There are also other vital risk factors to consider and we've discovered 3 warning signs for Caleres (1 shouldn't be ignored!) that you should be aware of before investing here.
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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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.