With Luminar Technologies, Inc. (NASDAQ:LAZR) It Looks Like You'll Get What You Pay For

When you see that almost half of the companies in the Auto Components industry in the United States have price-to-sales ratios (or "P/S") below 0.6x, Luminar Technologies, Inc. (NASDAQ:LAZR) looks to be giving off strong sell signals with its 45.5x 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.

View our latest analysis for Luminar Technologies

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

Luminar Technologies certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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.

Is There Enough Revenue Growth Forecasted For Luminar Technologies?

Luminar Technologies' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 47%. The latest three year period has also seen an excellent 238% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 150% per annum as estimated by the analysts watching the company. With the industry only predicted to deliver 17% per annum, the company is positioned for a stronger revenue result.

With this information, we can see why Luminar Technologies is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

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.

Our look into Luminar Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for Luminar Technologies that you should be aware of.

If you're unsure about the strength of Luminar Technologies' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.