Upstart Holdings, Inc.'s (NASDAQ:UPST) P/S Is Still On The Mark Following 28% Share Price Bounce

Upstart Holdings, Inc. (NASDAQ:UPST) shares have continued their recent momentum with a 28% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 56%.

Following the firm bounce in price, given around half the companies in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") below 1.4x, you may consider Upstart Holdings as a stock to avoid entirely with its 6.7x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Upstart Holdings

What Does Upstart Holdings' Recent Performance Look Like?

Upstart Holdings could be doing better as it's been growing revenue less than most other companies lately. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. 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 Upstart Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Upstart Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Upstart Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 2.5%. Revenue has also lifted 22% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 23% per annum during the coming three years according to the analysts following the company. With the industry only predicted to deliver 14% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Upstart Holdings' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Upstart Holdings' P/S Mean For Investors?

Upstart Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Our look into Upstart Holdings shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Upstart Holdings (1 makes us a bit uncomfortable!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.