Viant Technology Inc.'s (NASDAQ:DSP) Shares Not Telling The Full Story

Viant Technology Inc.'s (NASDAQ:DSP) price-to-sales (or "P/S") ratio of 0.7x might make it look like a strong buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.5x and even P/S above 12x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Viant Technology

What Does Viant Technology's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Viant Technology has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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 Viant Technology.

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

Viant Technology's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. The strong recent performance means it was also able to grow revenue by 40% 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.

Turning to the outlook, the next three years should generate growth of 13% per annum as estimated by the six analysts watching the company. With the industry predicted to deliver 15% growth per annum, the company is positioned for a comparable revenue result.

With this information, we find it odd that Viant Technology is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Viant Technology currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Viant Technology you should know about.

If these risks are making you reconsider your opinion on Viant Technology, 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.