Rocket Lab USA, Inc.'s (NASDAQ:RKLB) 28% Jump Shows Its Popularity With Investors

Despite an already strong run, Rocket Lab USA, Inc. (NASDAQ:RKLB) shares have been powering on, with a gain of 28% in the last thirty days. The last month tops off a massive increase of 100% in the last year.

Since its price has surged higher, when almost half of the companies in the United States' Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 2.4x, you may consider Rocket Lab USA as a stock not worth researching with its 13.1x 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.

See our latest analysis for Rocket Lab USA

How Rocket Lab USA Has Been Performing

Rocket Lab USA certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. 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 Rocket Lab USA's 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?

In order to justify its P/S ratio, Rocket Lab USA would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 41%. 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.

Looking ahead now, revenue is anticipated to climb by 46% per annum during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 2.7% each year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Rocket Lab USA's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Rocket Lab USA's P/S?

The strong share price surge has lead to Rocket Lab USA's 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 Rocket Lab USA maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Aerospace & Defense industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - Rocket Lab USA has 3 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Rocket Lab USA, 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.