FiscalNote Holdings, Inc.'s (NYSE:NOTE) 27% Share Price Surge Not Quite Adding Up

Despite an already strong run, FiscalNote Holdings, Inc. (NYSE:NOTE) shares have been powering on, with a gain of 27% in the last thirty days. Notwithstanding the latest gain, the annual share price return of 3.8% isn't as impressive.

In spite of the firm bounce in price, there still wouldn't be many who think FiscalNote Holdings' price-to-sales (or "P/S") ratio of 1.9x is worth a mention when the median P/S in the United States' Professional Services industry is similar at about 1.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for FiscalNote Holdings

How Has FiscalNote Holdings Performed Recently?

FiscalNote Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. 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 FiscalNote Holdings.

Is There Some Revenue Growth Forecasted For FiscalNote Holdings?

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

Retrospectively, the last year delivered a frustrating 3.7% decrease to the company's top line. Even so, admirably revenue has lifted 67% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to slump, contracting by 1.3% during the coming year according to the four analysts following the company. That's not great when the rest of the industry is expected to grow by 6.8%.

With this in consideration, we think it doesn't make sense that FiscalNote Holdings' P/S is closely matching its industry peers. 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 negative growth outlook.

What Does FiscalNote Holdings' P/S Mean For Investors?

FiscalNote Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 appears that FiscalNote Holdings currently trades on a higher than expected P/S for a company whose revenues are forecast to decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If we consider the revenue outlook, the P/S seems to indicate that potential investors may be paying a premium for the stock.

You need to take note of risks, for example - FiscalNote Holdings has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.

If you're unsure about the strength of FiscalNote Holdings' 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.