Market Participants Recognise Dave Inc.'s (NASDAQ:DAVE) Revenues Pushing Shares 29% Higher

Dave Inc. (NASDAQ:DAVE) shares have continued their recent momentum with a 29% gain in the last month alone. The last 30 days were the cherry on top of the stock's 422% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, given around half the companies in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") below 1.6x, you may consider Dave as a stock to avoid entirely with its 4.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Dave

How Dave Has Been Performing

With revenue growth that's superior to most other companies of late, Dave has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Dave.

Do Revenue Forecasts Match The High P/S Ratio?

Dave's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. Pleasingly, revenue has also lifted 117% in aggregate from three years ago, thanks to the last 12 months of growth. 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 16% per annum during the coming three years according to the eight analysts following the company. With the industry only predicted to deliver 14% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Dave's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Dave's P/S?

Dave'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.

Our look into Dave shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 2 warning signs for Dave you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.