Braze, Inc. (NASDAQ:BRZE) Stocks Pounded By 26% But Not Lagging Industry On Growth Or Pricing

Braze, Inc. (NASDAQ:BRZE) shares have had a horrible month, losing 26% after a relatively good period beforehand. Longer-term, the stock has been solid despite a difficult 30 days, gaining 21% in the last year.

In spite of the heavy fall in price, Braze may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 8.9x, since almost half of all companies in the Software industry in the United States have P/S ratios under 4.4x and even P/S lower than 1.8x are not unusual. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Braze

What Does Braze's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Braze has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

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

If we review the last year of revenue growth, the company posted a terrific increase of 33%. The latest three year period has also seen an excellent 214% 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 22% each year over the next three years. With the industry only predicted to deliver 15% each year, the company is positioned for a stronger revenue result.

With this information, we can see why Braze is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Braze's P/S

Braze's shares may have suffered, but its P/S remains high. 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.

Our look into Braze 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.

Having said that, be aware Braze is showing 3 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Braze, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.