Investors Appear Satisfied With Satellogic Inc.'s (NASDAQ:SATL) Prospects As Shares Rocket 38%

Satellogic Inc. (NASDAQ:SATL) shares have had a really impressive month, gaining 38% after a shaky period beforehand. The annual gain comes to 147% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, you could be forgiven for thinking Satellogic is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 31.3x, considering almost half the companies in the United States' Aerospace & Defense industry have P/S ratios below 2.2x. 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 Satellogic

How Has Satellogic Performed Recently?

The revenue growth achieved at Satellogic over the last year would be more than acceptable for most companies. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Satellogic will help you shine a light on its historical performance.

How Is Satellogic's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 28% last year. Pleasingly, revenue has also lifted 203% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is only predicted to deliver 6.1% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why Satellogic's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Satellogic's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

It's no surprise that Satellogic can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

You always need to take note of risks, for example - Satellogic has 4 warning signs we think you should be aware of.

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