Seagate Technology Holdings plc (NASDAQ:STX) Not Lagging Industry On Growth Or Pricing

Seagate Technology Holdings plc's (NASDAQ:STX) price-to-sales (or "P/S") ratio of 2.8x may not look like an appealing investment opportunity when you consider close to half the companies in the Tech industry in the United States have P/S ratios below 1.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Seagate Technology Holdings

What Does Seagate Technology Holdings' P/S Mean For Shareholders?

Recent times have been advantageous for Seagate Technology Holdings as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Seagate Technology Holdings' Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 6.6%. Still, lamentably revenue has fallen 37% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 12% each year during the coming three years according to the analysts following the company. With the industry only predicted to deliver 7.6% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Seagate Technology Holdings' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Seagate Technology Holdings' P/S Mean For Investors?

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Seagate Technology Holdings' 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 these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 5 warning signs for Seagate Technology Holdings (of which 2 are a bit unpleasant!) you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.