Revenues Tell The Story For Procore Technologies, Inc. (NYSE:PCOR)

Procore Technologies, Inc.'s (NYSE:PCOR) price-to-sales (or "P/S") ratio of 11.5x might make it look like a strong sell right now compared to the Software industry in the United States, where around half of the companies have P/S ratios below 4.6x and even P/S below 1.8x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Procore Technologies

How Has Procore Technologies Performed Recently?

With revenue growth that's superior to most other companies of late, Procore Technologies has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Is There Enough Revenue Growth Forecasted For Procore Technologies?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Procore Technologies' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. The strong recent performance means it was also able to grow revenue by 137% 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 analysts covering the company suggest revenue should grow by 20% each year over the next three years. Meanwhile, the rest of the industry is forecast to only expand by 15% per year, which is noticeably less attractive.

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

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.

As we suspected, our examination of Procore Technologies' 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 the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for Procore Technologies that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.