Wayfair shares appear overvalued on a price-to-sales basis relative to a modelled fair ratio, even after a sharp rally over the past year. The stock trades at about 1.0 times trailing sales, above a fair P/S ratio of roughly 0.8 times that reflects the company's revenue profile, profitability track record, size and risk. While expectations for ongoing revenue growth and improved profitability can support the current share price, any setback in converting sales into consistent cash flow may weigh on the valuation. Community views are split, with a bull case seeing the stock as 23% undervalued and a bear case viewing it as roughly fairly valued.
Wayfair IncArticle argues Wayfair stock is overvalued on P/S basis, with fair P/S of 0.8x vs current 1.0x, and warns that failure to convert revenue into cash flow may weigh on valuation.