Fathom Holdings Inc. (NASDAQ:FTHM) Stock Rockets 62% But Many Are Still Ignoring The Company

FATHOM HLDGS INC -2.70%

FATHOM HLDGS INC

FTHM

1.80

-2.70%

Fathom Holdings Inc. (NASDAQ:FTHM) shareholders are no doubt pleased to see that the share price has bounced 62% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Even after such a large jump in price, Fathom Holdings may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.2x, considering almost half of all companies in the Real Estate industry in the United States have P/S ratios greater than 2x and even P/S higher than 10x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Fathom Holdings

ps-multiple-vs-industry
NasdaqCM:FTHM Price to Sales Ratio vs Industry December 28th 2023

How Fathom Holdings Has Been Performing

Fathom Holdings 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. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Fathom Holdings will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

Fathom Holdings' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 17%. Still, the latest three year period has seen an excellent 126% 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.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 12% over the next year. With the industry predicted to deliver 9.9% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Fathom Holdings is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Fathom Holdings' P/S Mean For Investors?

Fathom Holdings' stock price has surged recently, but its but its P/S still remains modest. 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 examination of Fathom Holdings' revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 5 warning signs for Fathom Holdings that you should be aware of.

If you're unsure about the strength of Fathom Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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