Sentiment Still Eluding Zeta Global Holdings Corp. (NYSE:ZETA)

Zeta Global Holdings Corp.'s (NYSE:ZETA) price-to-sales (or "P/S") ratio of 2.6x might make it look like a buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 11x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Zeta Global Holdings

How Zeta Global Holdings Has Been Performing

Recent times have been advantageous for Zeta Global Holdings as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zeta Global Holdings.

How Is Zeta Global Holdings' Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Zeta Global Holdings' to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 26%. Pleasingly, revenue has also lifted 88% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 18% as estimated by the nine analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

In light of this, it's peculiar that Zeta Global Holdings' P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Zeta Global Holdings' P/S

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.

Zeta Global Holdings' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

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

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.