The ODP Corporation's (NASDAQ:ODP) Business Is Trailing The Industry But Its Shares Aren't

Simply Wall St.12-21 22:59

With a median price-to-sales (or "P/S") ratio of close to 0.4x in the Specialty Retail industry in the United States, you could be forgiven for feeling indifferent about The ODP Corporation's (NASDAQ...

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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.      Check out our latest analysis for ODP NasdaqGS:ODP Price to Sales Ratio vs Industry December 21st 2024 What Does ODP's P/S Mean For Shareholders?  ODP could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth.   One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around.  However, if this isn't the case, investors might get caught out paying too much for the stock.     If you'd like to see what analysts are forecasting going forward, you should check out our free report on ODP.  Is There Some Revenue Growth Forecasted For ODP?   In order to justify its P/S ratio, ODP would need to produce growth that's similar to the industry.   Retrospectively, the last year delivered a frustrating 12% decrease to the company's top line.   As a result, revenue from three years ago have also fallen 16% overall.  Therefore, it's fair to say the revenue growth recently has been undesirable for the company.     Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 4.8%  as estimated by the three analysts watching the company.  With the industry predicted to deliver 4.4% growth, that's a disappointing outcome.  With this in consideration, we think it doesn't make sense that ODP's P/S is closely matching its industry peers.  Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now.  Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.    The Key Takeaway  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.  It appears that ODP currently trades on a higher than expected P/S for a company whose revenues are forecast to decline.  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 the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.     And what about other risks? Every company has them, and we've spotted   2 warning signs for ODP   you should know about.    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). New: AI Stock Screener & AlertsOur new AI Stock Screener scans the market every day to uncover opportunities.• Dividend Powerhouses (3%+ Yield)• Undervalued Small Caps with Insider Buying• High growth Tech and AI CompaniesOr build your own from over 50 metrics.Explore Now for FreeHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2493265462"}