Airtasker Limited (ASX:ART) Looks Just Right With A 33% Price Jump

Airtasker Limited (ASX:ART) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 24% is also fairly reasonable.

Since its price has surged higher, you could be forgiven for thinking Airtasker is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.4x, considering almost half the companies in Australia's Interactive Media and Services industry have P/S ratios below 2.5x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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Check out our latest analysis for Airtasker

What Does Airtasker's Recent Performance Look Like?

Airtasker could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Airtasker's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 4.3%. This was backed up an excellent period prior to see revenue up by 74% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the four analysts following the company. With the industry only predicted to deliver 1.9%, the company is positioned for a stronger revenue result.

With this information, we can see why Airtasker is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Airtasker's P/S is on the rise since its shares have risen strongly. 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.

As we suspected, our examination of Airtasker's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Airtasker that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.