Market Participants Recognise Local Bounti Corporation's (NYSE:LOCL) Revenues Pushing Shares 35% Higher

Despite an already strong run, Local Bounti Corporation (NYSE:LOCL) shares have been powering on, with a gain of 35% in the last thirty days. The last 30 days bring the annual gain to a very sharp 60%.

After such a large jump in price, when almost half of the companies in the United States' Food industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Local Bounti as a stock probably not worth researching with its 1.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

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View our latest analysis for Local Bounti

How Local Bounti Has Been Performing

With revenue growth that's superior to most other companies of late, Local Bounti has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Local Bounti's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Local Bounti's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 40% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 68% during the coming year according to the dual analysts following the company. With the industry only predicted to deliver 5.1%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Local Bounti'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.

The Bottom Line On Local Bounti's P/S

The large bounce in Local Bounti's shares has lifted the company's P/S handsomely. 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 Local Bounti 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. It's hard to see the share price falling strongly in the near future under these circumstances.

You need to take note of risks, for example - Local Bounti has 5 warning signs (and 2 which can't be ignored) we think you should know about.

If these risks are making you reconsider your opinion on Local Bounti, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.