Symbotic Inc.'s (NASDAQ:SYM) Earnings Haven't Escaped The Attention Of Investors

When you see that almost half of the companies in the Machinery industry in the United States have price-to-sales ratios (or "P/S") below 1.6x, Symbotic Inc. (NASDAQ:SYM) looks to be giving off some sell signals with its 2.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Symbotic

What Does Symbotic's P/S Mean For Shareholders?

Recent times have been advantageous for Symbotic as its revenues have been rising faster 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Symbotic.

How Is Symbotic's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Symbotic's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 66% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. 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 43% during the coming year according to the analysts following the company. With the industry only predicted to deliver 1.5%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Symbotic'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 Does Symbotic's P/S Mean For Investors?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Symbotic maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Machinery industry, as expected. 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.

You always need to take note of risks, for example - Symbotic has 2 warning signs we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com