Investors Don't See Light At End Of LiveRamp Holdings, Inc.'s (NYSE:RAMP) Tunnel

You may think that with a price-to-sales (or "P/S") ratio of 2.7x LiveRamp Holdings, Inc. (NYSE:RAMP) is a stock worth checking out, seeing as almost half of all the Software companies in the United States have P/S ratios greater than 4.8x and even P/S higher than 12x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for LiveRamp Holdings

What Does LiveRamp Holdings' Recent Performance Look Like?

Recent revenue growth for LiveRamp Holdings has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on LiveRamp Holdings will be hoping that this isn't the case.

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

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as LiveRamp Holdings' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 14%. This was backed up an excellent period prior to see revenue up by 44% 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 8.3% per annum during the coming three years according to the eight analysts following the company. That's shaping up to be materially lower than the 20% per year growth forecast for the broader industry.

In light of this, it's understandable that LiveRamp Holdings' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

We've established that LiveRamp Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

It is also worth noting that we have found 1 warning sign for LiveRamp Holdings that you need to take into consideration.

If you're unsure about the strength of LiveRamp Holdings' 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.