LiveRamp Holdings, Inc. (NYSE:RAMP) Held Back By Insufficient Growth Even After Shares Climb 26%

The LiveRamp Holdings, Inc. (NYSE:RAMP) share price has done very well over the last month, posting an excellent gain of 26%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

Although its price has surged higher, LiveRamp Holdings may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.8x, considering almost half of all companies in the Software industry in the United States have P/S ratios greater than 5.3x and even P/S higher than 13x 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' P/S Mean For Shareholders?

With revenue growth that's inferior to most other companies of late, LiveRamp Holdings has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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?

In order to justify its P/S ratio, LiveRamp Holdings would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. Pleasingly, revenue has also lifted 46% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 8.7% per year during the coming three years according to the seven analysts following the company. With the industry predicted to deliver 21% growth each year, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why LiveRamp Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

LiveRamp Holdings' stock price has surged recently, but its but its P/S still remains modest. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware LiveRamp Holdings is showing 2 warning signs in our investment analysis, you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.