Rocket Lab USA, Inc.'s (NASDAQ:RKLB) 40% Jump Shows Its Popularity With Investors

Rocket Lab USA, Inc. (NASDAQ:RKLB) shareholders are no doubt pleased to see that the share price has bounced 40% in the last month, although it is still struggling to make up recently lost ground. The last 30 days were the cherry on top of the stock's 475% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, given around half the companies in the United States' Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Rocket Lab USA as a stock to avoid entirely with its 23.9x 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.

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View our latest analysis for Rocket Lab USA

How Has Rocket Lab USA Performed Recently?

Rocket Lab USA certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 78% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 41% each year during the coming three years according to the analysts following the company. With the industry only predicted to deliver 8.0% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Rocket Lab USA's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

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. 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 Rocket Lab USA shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Rocket Lab USA is showing 2 warning signs in our investment analysis, you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.