Investors Give loanDepot, Inc. (NYSE:LDI) Shares A 27% Hiding

The loanDepot, Inc. (NYSE:LDI) share price has fared very poorly over the last month, falling by a substantial 27%. For any long-term shareholders, the last month ends a year to forget by locking in a 51% share price decline.

After such a large drop in price, considering about half the companies operating in the United States' Diversified Financial industry have price-to-sales ratios (or "P/S") above 2.4x, you may consider loanDepot as an great investment opportunity with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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See our latest analysis for loanDepot

How Has loanDepot Performed Recently?

loanDepot's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

How Is loanDepot's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like loanDepot's to be considered reasonable.

Retrospectively, the last year delivered a decent 5.3% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 75% overall drop in revenue. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 19% each year during the coming three years according to the four analysts following the company. That's shaping up to be materially higher than the 7.3% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that loanDepot's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What We Can Learn From loanDepot's P/S?

loanDepot's P/S looks about as weak as its stock price lately. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

loanDepot's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you take the next step, you should know about the 2 warning signs for loanDepot (1 shouldn't be ignored!) that we have uncovered.

If these risks are making you reconsider your opinion on loanDepot, 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.