LandBridge Company LLC's (NYSE:LB) 40% Jump Shows Its Popularity With Investors

LandBridge Company LLC (NYSE:LB) shareholders have had their patience rewarded with a 40% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 8.2% isn't as attractive.

Following the firm bounce in price, when almost half of the companies in the United States' Real Estate industry have price-to-sales ratios (or "P/S") below 2.6x, you may consider LandBridge as a stock not worth researching with its 10.6x 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.

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See our latest analysis for LandBridge

How LandBridge Has Been Performing

LandBridge 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. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

Taking a look back first, we see that the company grew revenue by an impressive 97% last year. The strong recent performance means it was also able to grow revenue by 245% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 29% as estimated by the six analysts watching the company. With the industry only predicted to deliver 11%, the company is positioned for a stronger revenue result.

With this information, we can see why LandBridge is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On LandBridge's P/S

LandBridge's P/S has grown nicely over the last month thanks to a handy boost in the share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of LandBridge's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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 LandBridge you should be aware 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.