Market Participants Recognise Samsara Inc.'s (NYSE:IOT) Revenues Pushing Shares 28% Higher

Samsara Inc. (NYSE:IOT) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Taking a wider view, although not as strong as the last month, the full year gain of 14% is also fairly reasonable.

After such a large jump in price, Samsara may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 21.8x, when you consider almost half of the companies in the Software industry in the United States have P/S ratios under 5x 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.

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See our latest analysis for Samsara

How Has Samsara Performed Recently?

Recent times have been advantageous for Samsara as its revenues have been rising faster than most other companies. 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.

Keen to find out how analysts think Samsara's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Samsara's Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 34% gain to the company's top line. Pleasingly, revenue has also lifted 192% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 23% per annum as estimated by the analysts watching the company. With the industry only predicted to deliver 16% per year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Samsara'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 Samsara's P/S

Samsara's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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 Samsara's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

Plus, you should also learn about these 2 warning signs we've spotted with Samsara.

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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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.