Xometry, Inc.'s (NASDAQ:XMTR) 39% Share Price Surge Not Quite Adding Up

Those holding Xometry, Inc. (NASDAQ:XMTR) shares would be relieved that the share price has rebounded 39% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last 30 days bring the annual gain to a very sharp 51%.

Since its price has surged higher, given close to half the companies operating in the United States' Trade Distributors industry have price-to-sales ratios (or "P/S") below 1.1x, you may consider Xometry as a stock to potentially avoid with its 2.6x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

We check all companies for important risks. See what we found for Xometry in our free report.

Check out our latest analysis for Xometry

How Has Xometry Performed Recently?

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.

Keen to find out how analysts think Xometry'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 Xometry?

In order to justify its P/S ratio, Xometry would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an excellent 150% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 17% per annum during the coming three years according to the eleven analysts following the company. With the industry predicted to deliver 101% growth each year, the company is positioned for a weaker revenue result.

With this information, we find it concerning that Xometry is trading at a P/S higher than the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Bottom Line On Xometry's P/S

Xometry's P/S is on the rise since its shares have risen strongly. 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 comes as a surprise to see Xometry trade at such a high P/S given the revenue forecasts look less than stellar. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. At these price levels, investors should remain cautious, particularly if things don't improve.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Xometry with six simple checks will allow you to discover any risks that could be an issue.

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.