Market Participants Recognise Xometry, Inc.'s (NASDAQ:XMTR) Revenues Pushing Shares 54% Higher

Xometry, Inc. (NASDAQ:XMTR) shareholders would be excited to see that the share price has had a great month, posting a 54% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 41% over that time.

Since its price has surged higher, when almost half of the companies in the United States' Trade Distributors industry have price-to-sales ratios (or "P/S") below 1x, you may consider Xometry as a stock probably not worth researching with its 2.9x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Xometry

What Does Xometry's Recent Performance Look Like?

Recent times have been advantageous for Xometry 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 Xometry.

Is There Enough Revenue Growth Forecasted For Xometry?

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

If we review the last year of revenue growth, the company posted a terrific increase of 24%. Pleasingly, revenue has also lifted 207% 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.

Shifting to the future, estimates from the nine analysts covering the company suggest revenue should grow by 26% per year over the next three years. That's shaping up to be materially higher than the 5.5% each year growth forecast for the broader industry.

With this in mind, it's not hard to understand why Xometry'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.

The Key Takeaway

Xometry 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.

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

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

If you're unsure about the strength of Xometry'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.