After Leaping 53% Spire Global, Inc. (NYSE:SPIR) Shares Are Not Flying Under The Radar

Spire Global, Inc. (NYSE:SPIR) shares have continued their recent momentum with a 53% gain in the last month alone. Looking further back, the 24% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, when almost half of the companies in the United States' Professional Services industry have price-to-sales ratios (or "P/S") below 1.4x, you may consider Spire Global as a stock probably not worth researching with its 2.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Spire Global

How Has Spire Global Performed Recently?

Recent times have been advantageous for Spire Global as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 38%. The strong recent performance means it was also able to grow revenue by 252% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 33% during the coming year according to the five analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.6%, which is noticeably less attractive.

With this information, we can see why Spire Global is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Spire Global shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

We've established that Spire Global maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Professional Services industry, as expected. 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.

It is also worth noting that we have found 3 warning signs for Spire Global that you need to take into consideration.

If you're unsure about the strength of Spire Global'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.