Why Investors Shouldn't Be Surprised By Luminar Technologies, Inc.'s (NASDAQ:LAZR) 27% Share Price Surge

Luminar Technologies, Inc. (NASDAQ:LAZR) shareholders have had their patience rewarded with a 27% share price jump in the last month. But the last month did very little to improve the 74% share price decline over the last year.

Following the firm bounce in price, when almost half of the companies in the United States' Auto Components industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider Luminar Technologies as a stock not worth researching with its 10.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Luminar Technologies

What Does Luminar Technologies' P/S Mean For Shareholders?

Recent times have been advantageous for Luminar Technologies as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 58% 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. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 111% each year over the next three years. That's shaping up to be materially higher than the 17% each year growth forecast for the broader industry.

With this information, we can see why Luminar Technologies 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 Bottom Line On Luminar Technologies' P/S

The strong share price surge has lead to Luminar Technologies' P/S soaring as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Luminar Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Auto Components industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 5 warning signs for Luminar Technologies that we have uncovered.

If these risks are making you reconsider your opinion on Luminar Technologies, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com