(NASDAQ:SOUN) shares have performed very well over the past month, with an outstanding gain of 49%. This recent share price rebound puts the stock up an impressive 302% over the past 12 months.
With nearly half of the companies in the U.S. software industry having P/S ratios below 5.1x, and P/Ss even lower than 1.8x not uncommon, SoundHound AI is now trading at 46.6x price-to-sales ( or “P/S”) ratio may be sending a very bearish signal. However, there may be a reason why the P/S is quite high, and further investigation is needed to determine if that reason is justified.
View our latest analysis for SoundHound AI
November 9, 2024 NASDAQGM:SOUN comparison of stock price to sales ratio
How was SoundHound AI’s recent performance?
Soundhound AI, which has recently shown superior sales growth than most other companies, is performing relatively well. Many are expecting the strong earnings performance to continue, which appears to have pushed the price-to-earnings ratio (P/S) higher. But if not, investors may end up paying too much for the stock.
If you want to know what analysts are predicting for the future, check out SoundHound AI.free Check out the report.
Are your earnings forecasts consistent with a high P/S ratio?
To justify a high P/S ratio, SoundHound AI would need to show exceptional growth well above the industry average.
Looking at the sales growth rate over the past year, we recorded an incredible increase of 53%. Fortunately, our growth over the last 12 months has seen our sales increase by a total of 174% compared to three years ago. So shareholders would certainly welcome this medium-term revenue growth rate.
Turning to the future, the seven analysts covering the company expect sales to grow 111% next year. Given that the industry is expected to grow at only 25%, the company is positioned to deliver even higher earnings performance.
This information helps us understand why SoundHound AI is trading at such a high price-to-earnings ratio compared to its industry. Shareholders don’t seem to want to burden a company that is looking at a potentially more prosperous future.
What does SoundHound AI’s P/S mean to investors?
SoundHound AI’s P/S has grown nicely over the past month, thanks in large part to the stock’s significant rise. In general, you should be cautious about attaching too much significance to the price-to-sales ratio when making investment decisions, but it can tell you a lot about what other market participants think about the company.
As expected, we confirmed that SoundHound AI is maintaining a high P/S based on its projected revenue growth rate being higher than other software industries. Current shareholders are satisfied with the P/S because they are confident that future earnings will not be jeopardized. As long as these conditions do not change, stock prices will continue to provide strong support.
There are also other important risk factors to consider before investing, About SoundHound AI need to know 4 warning signs Found it.
If you’re interested in solid, profitable companies, consider a list of interesting companies that trade at low price-to-earnings ratios but have a proven track record of growing earnings. for free Check it out.
Valuation is complex, but we want to simplify it.
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