Qoria Limited's (ASX:QOR) Share Price Matching Investor Opinion

Qoria Limited's (ASX:QOR) price-to-sales (or "P/S") ratio of 3.3x may not look like an appealing investment opportunity when you consider close to half the companies in the Software industry in Australia have P/S ratios below 2.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Qoria

What Does Qoria's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Qoria has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Qoria's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Qoria's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Qoria's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 82% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 22% per annum over the next three years. With the industry only predicted to deliver 20% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Qoria's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Qoria maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for Qoria (1 makes us a bit uncomfortable!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.