Rekor Systems, Inc.'s (NASDAQ:REKR) P/S Is Still On The Mark Following 35% Share Price Bounce

Rekor Systems, Inc. (NASDAQ:REKR) shares have had a really impressive month, gaining 35% after a shaky period beforehand. The last month tops off a massive increase of 179% in the last year.

Following the firm bounce in price, Rekor Systems may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 8.7x, when you consider almost half of the companies in the Software industry in the United States have P/S ratios under 4.5x and even P/S lower than 1.8x 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.

View our latest analysis for Rekor Systems

What Does Rekor Systems' P/S Mean For Shareholders?

Rekor Systems certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might 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 Rekor Systems.

What Are Revenue Growth Metrics Telling Us About The High P/S?

Rekor Systems' 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 118%. The latest three year period has also seen an excellent 284% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 94% as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 15% growth forecast for the broader industry.

With this information, we can see why Rekor Systems is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Rekor Systems' P/S Mean For Investors?

Shares in Rekor Systems have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our look into Rekor Systems 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.

Before you take the next step, you should know about the 3 warning signs for Rekor Systems (1 is a bit unpleasant!) that we have uncovered.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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