Cellebrite DI Ltd.'s (NASDAQ:CLBT) 29% Share Price Surge Not Quite Adding Up

Despite an already strong run, Cellebrite DI Ltd. (NASDAQ:CLBT) shares have been powering on, with a gain of 29% in the last thirty days. The last month tops off a massive increase of 116% in the last year.

Following the firm bounce in price, Cellebrite DI may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 9.9x, when you consider almost half of the companies in the Software industry in the United States have P/S ratios under 4.7x and even P/S lower than 1.7x aren't out of the ordinary. 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 Cellebrite DI

What Does Cellebrite DI's P/S Mean For Shareholders?

There hasn't been much to differentiate Cellebrite DI's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little 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 Cellebrite DI.

How Is Cellebrite DI's Revenue Growth Trending?

Cellebrite DI's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. The strong recent performance means it was also able to grow revenue by 56% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 18% each year during the coming three years according to the eight analysts following the company. That's shaping up to be similar to the 18% each year growth forecast for the broader industry.

In light of this, it's curious that Cellebrite DI's P/S sits above the majority of other companies. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. These shareholders may be setting themselves up for disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Cellebrite DI's P/S?

Cellebrite DI's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Given Cellebrite DI's future revenue forecasts are in line with the wider industry, the fact that it trades at an elevated P/S is somewhat surprising. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. Unless the company can jump ahead of the rest of the industry in the short-term, it'll be a challenge to maintain the share price at current levels.

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