With Luminar Technologies, Inc. (NASDAQ:LAZR) It Looks Like You'll Get What You Pay For

When close to half the companies in the Auto Components industry in the United States have price-to-sales ratios (or "P/S") below 0.8x, you may consider Luminar Technologies, Inc. (NASDAQ:LAZR) as a stock to avoid entirely with its 11.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Luminar Technologies

How Has Luminar Technologies Performed Recently?

Recent times have been advantageous for Luminar Technologies as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. 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 Luminar Technologies.

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

Luminar Technologies' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 71%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 113% per annum during the coming three years according to the eleven analysts following the company. That's shaping up to be materially higher than the 15% each year growth forecast for the broader industry.

With this information, we can see why Luminar Technologies is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Luminar Technologies' P/S?

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 Luminar Technologies shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

There are also other vital risk factors to consider before investing and we've discovered 4 warning signs for Luminar Technologies that you should be aware of.

If these risks are making you reconsider your opinion on Luminar Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.