Couchbase, Inc.'s (NASDAQ:BASE) 26% Cheaper Price Remains In Tune With Revenues

Couchbase, Inc. (NASDAQ:BASE) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 33% in that time.

Although its price has dipped substantially, when almost half of the companies in the United States' IT industry have price-to-sales ratios (or "P/S") below 2.6x, you may still consider Couchbase as a stock probably not worth researching with its 3.9x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Couchbase

What Does Couchbase's Recent Performance Look Like?

Couchbase certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Couchbase will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For Couchbase?

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

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. The latest three year period has also seen an excellent 74% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 17% per annum over the next three years. That's shaping up to be materially higher than the 13% per year growth forecast for the broader industry.

In light of this, it's understandable that Couchbase's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Couchbase's P/S Mean For Investors?

Despite the recent share price weakness, Couchbase's P/S remains higher than most other companies in the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Couchbase shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

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