Market Participants Recognise Procore Technologies, Inc.'s (NYSE:PCOR) Revenues

With a price-to-sales (or "P/S") ratio of 8.4x Procore Technologies, Inc. (NYSE:PCOR) may be sending very bearish signals at the moment, given that almost half of all the Software companies in the United States have P/S ratios under 4.2x and even P/S lower than 1.7x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Procore Technologies

How Has Procore Technologies Performed Recently?

Recent times have been advantageous for Procore Technologies 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Procore Technologies will help you uncover what's on the horizon.

How Is Procore Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Procore Technologies would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 34% last year. The strong recent performance means it was also able to grow revenue by 123% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 21% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 16% each year, which is noticeably less attractive.

In light of this, it's understandable that Procore Technologies' P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Procore Technologies' P/S

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Procore Technologies' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for Procore Technologies that you need to take into consideration.

If you're unsure about the strength of Procore Technologies' 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.