What You Can Learn From NaaS Technology Inc.'s (NASDAQ:NAAS) P/S

When close to half the companies in the Specialty Retail industry in the United States have price-to-sales ratios (or "P/S") below 0.3x, you may consider NaaS Technology Inc. (NASDAQ:NAAS) as a stock to avoid entirely with its 18.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for NaaS Technology

What Does NaaS Technology's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, NaaS Technology 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on NaaS Technology.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, NaaS Technology would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. The amazing performance means it was also able to deliver huge revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 1,044% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 7.5% growth forecast for the broader industry.

With this information, we can see why NaaS Technology 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 NaaS Technology's P/S

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.

We've established that NaaS Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Specialty Retail industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

We don't want to rain on the parade too much, but we did also find 2 warning signs for NaaS Technology that you need to be mindful of.

If you're unsure about the strength of NaaS Technology'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.