Market Participants Recognise Rigetti Computing, Inc.'s (NASDAQ:RGTI) Revenues Pushing Shares 44% Higher

Despite an already strong run, Rigetti Computing, Inc. (NASDAQ:RGTI) shares have been powering on, with a gain of 44% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 66% in the last year.

Following the firm bounce in price, Rigetti Computing may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 28.1x, since almost half of all companies in the Semiconductor industry in the United States have P/S ratios under 4x and even P/S lower than 1.6x are not unusual. 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.

View our latest analysis for Rigetti Computing

How Rigetti Computing Has Been Performing

While the industry has experienced revenue growth lately, Rigetti Computing's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely 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 Rigetti Computing.

How Is Rigetti Computing's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. Even so, admirably revenue has lifted 42% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 62% per year over the next three years. With the industry only predicted to deliver 25% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Rigetti Computing's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Rigetti Computing's P/S

Shares in Rigetti Computing have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that Rigetti Computing maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Semiconductor industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 5 warning signs for Rigetti Computing (2 don't sit too well with us!) that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.