Ouster, Inc.'s (NASDAQ:OUST) Share Price Is Still Matching Investor Opinion Despite 27% Slump

Ouster, Inc. (NASDAQ:OUST) shares have had a horrible month, losing 27% after a relatively good period beforehand. Looking at the bigger picture, even after this poor month the stock is up 47% in the last year.

In spite of the heavy fall in price, when almost half of the companies in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2x, you may still consider Ouster as a stock probably not worth researching with its 3.5x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Ouster

How Has Ouster Performed Recently?

Ouster certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Ouster's Revenue Growth Trending?

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

Taking a look back first, we see that the company grew revenue by an impressive 51% last year. Pleasingly, revenue has also lifted 275% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 40% each year as estimated by the four analysts watching the company. With the industry only predicted to deliver 8.7% each year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Ouster's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Ouster's P/S

Despite the recent share price weakness, Ouster's P/S remains higher than most other companies in the 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.

As we suspected, our examination of Ouster's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 3 warning signs for Ouster that we have uncovered.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.