After Leaping 26% Zeta Global Holdings Corp. (NYSE:ZETA) Shares Are Not Flying Under The Radar

Zeta Global Holdings Corp. (NYSE:ZETA) shares have continued their recent momentum with a 26% gain in the last month alone. The annual gain comes to 119% following the latest surge, making investors sit up and take notice.

After such a large jump in price, Zeta Global Holdings' price-to-sales (or "P/S") ratio of 5.8x might make it look like a sell right now compared to the wider Software industry in the United States, where around half of the companies have P/S ratios below 4.8x and even P/S below 1.7x are quite common. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Zeta Global Holdings

What Does Zeta Global Holdings' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Zeta Global Holdings has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Zeta Global Holdings would need to produce impressive growth in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 23%. The strong recent performance means it was also able to grow revenue by 97% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 22% during the coming year according to the twelve analysts following the company. That's shaping up to be materially higher than the 14% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Zeta Global Holdings' 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 Key Takeaway

The large bounce in Zeta Global Holdings' shares has lifted the company's P/S handsomely. 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 Zeta Global Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Having said that, be aware Zeta Global Holdings is showing 1 warning sign in our investment analysis, you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

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