a.k.a. Brands Holding Corp. (NYSE:AKA) shareholders have had their patience rewarded with a 118% share price jump in the last month. The last 30 days were the cherry on top of the stock's 361% gain in the last year, which is nothing short of spectacular.

Even after such a large jump in price, there still wouldn't be many who think a.k.a. Brands Holding's price-to-sales (or "P/S") ratio of 0.4x is worth a mention when it essentially matches the median P/S in the United States' Specialty Retail industry. 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.

What Does a.k.a. Brands Holding's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, a.k.a. Brands Holding's revenue has gone into reverse gear, which is not great. 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.

Is There Some Revenue Growth Forecasted For a.k.a. Brands Holding?

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

Retrospectively, the last year delivered a frustrating 7.1% decrease to the company's top line. Still, the latest three year period has seen an excellent 123% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 5.2% per annum as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 5.7% per annum, which is not materially different.

With this in mind, it makes sense that a.k.a. Brands Holding's 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.

The Key Takeaway

a.k.a. Brands Holding's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look at a.k.a. Brands Holding's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 2 warning signs for a.k.a. Brands Holding you should be aware of, and 1 of them shouldn't be ignored.

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.

Have 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.