Why Investors Shouldn't Be Surprised By Symbotic Inc.'s (NASDAQ:SYM) 32% Share Price Surge

Symbotic Inc. (NASDAQ:SYM) shareholders have had their patience rewarded with a 32% share price jump in the last month. The last month tops off a massive increase of 132% in the last year.

Following the firm bounce in price, you could be forgiven for thinking Symbotic is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.5x, considering almost half the companies in the United States' Machinery industry have P/S ratios below 2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

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Check out our latest analysis for Symbotic

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

Recent times have been pleasing for Symbotic as its revenue has risen in spite of the industry's average revenue going into reverse. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Symbotic?

Symbotic's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 36% 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. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 23% each year as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 5.5% per year, which is noticeably less attractive.

In light of this, it's understandable that Symbotic's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Symbotic shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Symbotic's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Symbotic, and understanding these should be part of your investment process.

If you're unsure about the strength of Symbotic's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.