After Leaping 51% Planet Labs PBC (NYSE:PL) Shares Are Not Flying Under The Radar

Despite an already strong run, Planet Labs PBC (NYSE:PL) shares have been powering on, with a gain of 51% in the last thirty days. This latest share price bounce rounds out a remarkable 403% gain over the last twelve months.

After such a large jump in price, you could be forgiven for thinking Planet Labs PBC is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 11.2x, considering almost half the companies in the United States' Professional Services industry have P/S ratios below 1.2x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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View our latest analysis for Planet Labs PBC

How Has Planet Labs PBC Performed Recently?

Planet Labs PBC's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. 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 Planet Labs PBC's future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The High P/S?

The only time you'd be truly comfortable seeing a P/S as steep as Planet Labs PBC's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. This was backed up an excellent period prior to see revenue up by 67% in total over the last three years. 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 ten analysts following the company. That's shaping up to be materially higher than the 7.0% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Planet Labs PBC's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Planet Labs PBC's P/S?

Planet Labs PBC's P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Planet Labs PBC'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 the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for Planet Labs PBC that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.