Why Revolve Stock Crashed Today

Shares of Revolve Group (NYSE: RVLV) were down 23.5% as of 11:40 a.m. ET on Wednesday after the company reported results for the first quarter on Tuesday. The company reported sales growth of 58% year over year, driven by a 38% increase in active customers on a trailing-12-month basis.

Sometimes the market punishes stocks for reasons that don't make sense, and this seems to be one of those days. Valuation could have played a role. The stock had been trading around a price-to-earnings (P/E) ratio of 40 based on forward analyst estimates earlier this year. Still, that is not too expensive for a company posting this level of sales growth.

What's more, Revolve's profitability is holding up despite supply chain and inflationary pressures. While net income increased only 1% year over year, that was mainly due to a higher tax rate. Pre-tax income increased by 38% year over year, with free cash flow up 62%.

Source Fool.com