Integral Ad Science Holding Corp.'s (NASDAQ:IAS) 42% Cheaper Price Remains In Tune With Revenues

Integral Ad Science Holding Corp. (NASDAQ:IAS) shareholders won't be pleased to see that the share price has had a very rough month, dropping 42% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 25% in that time.

In spite of the heavy fall in price, you could still be forgiven for thinking Integral Ad Science Holding is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.1x, considering almost half the companies in the United States' Media industry have P/S ratios below 0.9x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Integral Ad Science Holding

How Integral Ad Science Holding Has Been Performing

With revenue growth that's superior to most other companies of late, Integral Ad Science Holding has been doing relatively well. 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 Integral Ad Science Holding will help you uncover what's on the horizon.

How Is Integral Ad Science Holding's Revenue Growth Trending?

Integral Ad Science Holding'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.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The latest three year period has also seen an excellent 97% overall rise in revenue, aided by its short-term performance. 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 13% per year during the coming three years according to the analysts following the company. With the industry only predicted to deliver 4.4% per annum, the company is positioned for a stronger revenue result.

With this information, we can see why Integral Ad Science Holding 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 Key Takeaway

Integral Ad Science Holding's shares may have suffered, but its P/S remains high. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Integral Ad Science Holding maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Media 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.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Integral Ad Science Holding you should know about.

If you're unsure about the strength of Integral Ad Science Holding'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.