What You Can Learn From Airship AI Holdings, Inc.'s (NASDAQ:AISP) P/S

You may think that with a price-to-sales (or "P/S") ratio of 6.1x Airship AI Holdings, Inc. (NASDAQ:AISP) is a stock to potentially avoid, seeing as almost half of all the Software companies in the United States have P/S ratios under 5x and even P/S lower than 1.8x aren't out of the ordinary. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

We've discovered 3 warning signs about Airship AI Holdings. View them for free.

See our latest analysis for Airship AI Holdings

What Does Airship AI Holdings' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Airship AI Holdings 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 Airship AI Holdings' future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 87% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 77% 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.

Looking ahead now, revenue is anticipated to climb by 29% during the coming year according to the lone analyst following the company. With the industry only predicted to deliver 15%, the company is positioned for a stronger revenue result.

With this information, we can see why Airship AI Holdings 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 Airship AI Holdings' 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.

As we suspected, our examination of Airship AI Holdings' 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 these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Airship AI Holdings (of which 2 can't be ignored!) you should know about.

If you're unsure about the strength of Airship AI Holdings' 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.