Revenues Tell The Story For SoundHound AI, Inc. (NASDAQ:SOUN) As Its Stock Soars 32%

SoundHound AI, Inc. (NASDAQ:SOUN) shares have continued their recent momentum with a 32% gain in the last month alone. The last month tops off a massive increase of 228% in the last year.

Since its price has surged higher, SoundHound AI may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 44.2x, since almost half of all companies in the Software industry in the United States have P/S ratios under 5.2x and even P/S lower than 2x 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 lofty.

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See our latest analysis for SoundHound AI

What Does SoundHound AI's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, SoundHound AI 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 SoundHound AI will help you uncover what's on the horizon.

Is There Enough Revenue Growth Forecasted For SoundHound AI?

SoundHound AI'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.

Retrospectively, the last year delivered an exceptional 137% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 45% as estimated by the eight analysts watching the company. With the industry only predicted to deliver 20%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why SoundHound AI's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On SoundHound AI's P/S

Shares in SoundHound AI have seen a strong upwards swing lately, which has really helped boost its P/S figure. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of SoundHound AI's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 3 warning signs for SoundHound AI you should know about.

If you're unsure about the strength of SoundHound AI'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.