Hooker Furnishings Corporation (NASDAQ:HOFT) shareholders that were waiting for something to happen have been dealt a blow with a 27% share price drop in the last month. Indeed, the recent drop has reduced its annual gain to a relatively sedate 9.7% over the last twelve months.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Hooker Furnishings' P/S ratio of 0.4x, since the median price-to-sales (or "P/S") ratio for the Consumer Durables industry in the United States is also close to 0.8x. 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.

What Does Hooker Furnishings' Recent Performance Look Like?

Hooker Furnishings 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. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

How Is Hooker Furnishings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Hooker Furnishings' is when the company's growth is tracking the industry closely.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 26%. As a result, revenue from three years ago have also fallen 20% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 8.8% per year during the coming three years according to the dual analysts following the company. With the industry only predicted to deliver 5.3% each year, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Hooker Furnishings is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Following Hooker Furnishings' share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Hooker Furnishings currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Hooker Furnishings you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.