Upstart Holdings, Inc. (NASDAQ:UPST) Shares Slammed 31% But Getting In Cheap Might Be Difficult Regardless

Upstart Holdings, Inc. (NASDAQ:UPST) shareholders that were waiting for something to happen have been dealt a blow with a 31% share price drop in the last month. Looking at the bigger picture, even after this poor month the stock is up 80% in the last year.

Although its price has dipped substantially, when almost half of the companies in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") below 1.5x, you may still consider Upstart Holdings as a stock not worth researching with its 6.6x 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.

View our latest analysis for Upstart Holdings

What Does Upstart Holdings' Recent Performance Look Like?

Upstart Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Upstart Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

Upstart Holdings' 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.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. Still, revenue has fallen 21% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Turning to the outlook, the next three years should generate growth of 30% per annum as estimated by the twelve analysts watching the company. That's shaping up to be materially higher than the 15% per annum growth forecast for the broader industry.

In light of this, it's understandable that Upstart Holdings' 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 Upstart Holdings' P/S?

Upstart Holdings' shares may have suffered, but its P/S remains high. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Upstart Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Consumer Finance industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about these 2 warning signs we've spotted with Upstart Holdings.

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.