Benign Growth For Kaltura, Inc. (NASDAQ:KLTR) Underpins Its Share Price

With a price-to-sales (or "P/S") ratio of 1.4x Kaltura, Inc. (NASDAQ:KLTR) may be sending very bullish signals at the moment, given that almost half of all the Software companies in the United States have P/S ratios greater than 4.9x and even P/S higher than 11x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

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See our latest analysis for Kaltura

How Kaltura Has Been Performing

Recent times haven't been great for Kaltura as its revenue has been rising slower than most other companies. The P/S ratio is probably low because investors think this lacklustre revenue performance isn't going to get any better. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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Do Revenue Forecasts Match The Low P/S Ratio?

Kaltura's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Fortunately, a few good years before that means that it was still able to grow revenue by 8.0% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 0.8% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 22%, which is noticeably more attractive.

In light of this, it's understandable that Kaltura's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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.

We've established that Kaltura maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Before you settle on your opinion, we've discovered 2 warning signs for Kaltura that you should be aware of.

If you're unsure about the strength of Kaltura's 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.