After Leaping 27% Planet Labs PBC (NYSE:PL) Shares Are Not Flying Under The Radar

Planet Labs PBC (NYSE:PL) shares have continued their recent momentum with a 27% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 32% in the last twelve months.

Since its price has surged higher, you could be forgiven for thinking Planet Labs PBC is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3x, considering almost half the companies in the United States' Professional Services industry have P/S ratios below 1.6x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Planet Labs PBC

How Has Planet Labs PBC Performed Recently?

With revenue growth that's superior to most other companies of late, Planet Labs PBC has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Planet Labs PBC will help you uncover what's on the horizon.

How Is Planet Labs PBC's Revenue Growth Trending?

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

Taking a look back first, we see that the company managed to grow revenues by a handy 12% last year. Pleasingly, revenue has also lifted 98% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 16% during the coming year according to the eleven analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 5.5%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Planet Labs PBC'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 Final Word

The large bounce in Planet Labs PBC's shares has lifted the company's P/S handsomely. 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.

Our look into Planet Labs PBC shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. 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 Planet Labs PBC, and understanding them should be part of your investment process.

If these risks are making you reconsider your opinion on Planet Labs PBC, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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