Uber Technologies, Inc.'s (NYSE:UBER) Popularity With Investors Is Clear

When close to half the companies in the Transportation industry in the United States have price-to-sales ratios (or "P/S") below 0.9x, you may consider Uber Technologies, Inc. (NYSE:UBER) as a stock to avoid entirely with its 3.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Uber Technologies

How Has Uber Technologies Performed Recently?

Recent times have been advantageous for Uber Technologies as its revenues have been rising faster 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 Uber Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Uber Technologies?

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

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. The strong recent performance means it was also able to grow revenue by 230% 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.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 15% each year over the next three years. That's shaping up to be materially higher than the 9.5% each year growth forecast for the broader industry.

With this information, we can see why Uber Technologies is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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 into Uber Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

It is also worth noting that we have found 4 warning signs for Uber Technologies (1 shouldn't be ignored!) that you need to take into consideration.

If you're unsure about the strength of Uber Technologies' 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.