Why Revolve Stock Is Down 60% This Year
The big share price gains that Revolve Group (NYSE: RVLV) delivered to its shareholders earlier in the pandemic have been completely wiped out by this year's market sell-off. Many are worried about high inflation and lower consumer spending amid a weakening economy. But even with those headwinds, Revolve posted strong sales growth through the second quarter.
Much of the stock's pullback in 2022 can be traced to its previously high valuation. Now, its valuation is more in line with the broader market's average, but its share price has continued to slide in recent months as investors underestimate Revolve's long-term growth potential.
Revolve ended 2021 firing on all cylinders. In the fourth quarter, sales and net income increased 70% and 55%, respectively, on a year-over-year basis. That performance explains why investors bid the shares up to a peak price-to-earnings (P/E) ratio of more than 72 late that year. For comparison, the S&P 500's P/E ratio was just 25 around that time.
Source Fool.com