SiteMinder Limited's (ASX:SDR) Earnings Haven't Escaped The Attention Of Investors

When close to half the companies in the Software industry in Australia have price-to-sales ratios (or "P/S") below 2.9x, you may consider SiteMinder Limited (ASX:SDR) as a stock to avoid entirely with its 6.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for SiteMinder

What Does SiteMinder's Recent Performance Look Like?

There hasn't been much to differentiate SiteMinder's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on SiteMinder will help you uncover what's on the horizon.

How Is SiteMinder's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Pleasingly, revenue has also lifted 93% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 27% per year during the coming three years according to the analysts following the company. With the industry only predicted to deliver 20% per year, the company is positioned for a stronger revenue result.

With this information, we can see why SiteMinder 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.

What We Can Learn From SiteMinder's P/S?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that SiteMinder 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.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for SiteMinder with six simple checks.

If these risks are making you reconsider your opinion on SiteMinder, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.