Rigetti Computing, Inc.'s (NASDAQ:RGTI) 65% Jump Shows Its Popularity With Investors

Rigetti Computing, Inc. (NASDAQ:RGTI) shareholders have had their patience rewarded with a 65% share price jump in the last month. The last month tops off a massive increase of 141% in the last year.

Since its price has surged higher, Rigetti Computing's price-to-sales (or "P/S") ratio of 21.2x might make it look like a strong sell right now compared to other companies in the Semiconductor industry in the United States, where around half of the companies have P/S ratios below 4x and even P/S below 1.7x are quite common. 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 Rigetti Computing

How Rigetti Computing Has Been Performing

With revenue growth that's superior to most other companies of late, Rigetti Computing has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Rigetti Computing's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Rigetti Computing's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 60% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 165% 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.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 64% per year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 25% per annum, which is noticeably less attractive.

With this in mind, it's not hard to understand why Rigetti Computing'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 Final Word

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.

As we suspected, our examination of Rigetti Computing'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. It's hard to see the share price falling strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 3 warning signs for Rigetti Computing that 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.