LiveRamp Holdings, Inc.'s (NYSE:RAMP) Shares Not Telling The Full Story
LiveRamp Holdings, Inc.'s (NYSE:RAMP) price-to-sales (or "P/S") ratio of 2.6x might make it look like a buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.4x and even P/S above 10x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.
See our latest analysis for LiveRamp Holdings
How Has LiveRamp Holdings Performed Recently?
LiveRamp Holdings' revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.
Keen to find out how analysts think LiveRamp Holdings' future stacks up against the industry? In that case, our free report is a great place to start.
What Are Revenue Growth Metrics Telling Us About The Low P/S?
In order to justify its P/S ratio, LiveRamp Holdings would need to produce sluggish growth that's trailing the industry.
Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. Pleasingly, revenue has also lifted 67% in aggregate from three years ago, thanks to the last 12 months of growth. 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% each year as estimated by the ten analysts watching the company. With the industry predicted to deliver 13% growth per annum, the company is positioned for a comparable revenue result.
With this in consideration, we find it intriguing that LiveRamp Holdings' P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.
The Key Takeaway
Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've seen that LiveRamp Holdings 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. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with LiveRamp Holdings, and understanding them should be part of your investment process.
If you're unsure about the strength of LiveRamp Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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