Matterport, Inc.'s (NASDAQ:MTTR) 29% Price Boost Is Out Of Tune With Revenues

Matterport, Inc. (NASDAQ:MTTR) shares have had a really impressive month, gaining 29% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 25% over that time.

Following the firm bounce in price, Matterport may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 5.2x, since almost half of all companies in the Software in the United States have P/S ratios under 4.2x and even P/S lower than 1.7x are not unusual. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Matterport

How Has Matterport Performed Recently?

Recent times have been advantageous for Matterport as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Matterport's 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?

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

Retrospectively, the last year delivered an exceptional 31% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 86% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 8.5% over the next year. Meanwhile, the rest of the industry is forecast to expand by 15%, which is noticeably more attractive.

With this information, we find it concerning that Matterport is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

The Key Takeaway

Matterport's P/S is on the rise since its shares have risen strongly. 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.

It comes as a surprise to see Matterport trade at such a high P/S given the revenue forecasts look less than stellar. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. At these price levels, investors should remain cautious, particularly if things don't improve.

Before you take the next step, you should know about the 4 warning signs for Matterport that we have uncovered.

If these risks are making you reconsider your opinion on Matterport, 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.