What Does Lightspeed Commerce's P/S Mean For Shareholders?
Recent times have been advantageous for Lightspeed Commerce as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favor.
How Is Lightspeed Commerce's Revenue Growth Trending?
Lightspeed Commerce's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.
Retrospectively, the last year delivered an exceptional 43% gain to the company's top line. Spectacularly, three-year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 24% each year over the next three years. With the industry predicted to deliver 24% growth per year, the company is positioned for a comparable revenue result.
In light of this, it's understandable that Lightspeed Commerce's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount 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.
My look at Lightspeed Commerce's revenue growth estimates shows that its P/S is about what I expect, as both metrics follow closely with the industry averages. At this stage, investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.
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