Mobileye Global Inc.'s (NASDAQ:MBLY) Price In Tune With Revenues

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 0.7x, Mobileye Global Inc. (NASDAQ:MBLY) looks to be giving off strong sell signals with its 15.7x 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 Mobileye Global

How Mobileye Global Has Been Performing

Recent times have been advantageous for Mobileye Global as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Mobileye Global's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 26% gain to the company's top line. The latest three year period has also seen an excellent 99% 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 35% each year 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 Mobileye Global 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.

What We Can Learn From Mobileye Global's P/S?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Mobileye Global 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. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Mobileye Global with six simple checks will allow you to discover any risks that could be an issue.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.