Semrush Holdings, Inc.'s (NYSE:SEMR) Share Price Is Still Matching Investor Opinion Despite 46% Slump

Semrush Holdings, Inc. (NYSE:SEMR) shareholders won't be pleased to see that the share price has had a very rough month, dropping 46% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 12% in that time.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Semrush Holdings' P/S ratio of 3.8x, since the median price-to-sales (or "P/S") ratio for the Software industry in the United States is also close to 4.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Semrush Holdings

How Has Semrush Holdings Performed Recently?

Semrush Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

How Is Semrush Holdings' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Semrush Holdings' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 22% gain to the company's top line. The latest three year period has also seen an excellent 100% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% per annum during the coming three years according to the seven analysts following the company. With the industry predicted to deliver 21% growth per year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that Semrush Holdings' P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Semrush Holdings' P/S Mean For Investors?

With its share price dropping off a cliff, the P/S for Semrush Holdings looks to be in line with the rest of the Software industry. 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.

Our look at Semrush Holdings' revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Semrush Holdings that you should be aware of.

If you're unsure about the strength of Semrush 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.