Samsara Inc. (NYSE:IOT) Looks Just Right With A 26% Price Jump – Yahoo Finance

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Samsara Inc. (NYSE:IOT) shareholders have had their patience rewarded with a 26% share price jump in the last month. The annual gain comes to 175% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, Samsara may be sending very bearish signals at the moment with a price-to-sales (or “P/S”) ratio of 21.7x, since almost half of all companies in the Software industry in the United States have P/S ratios under 4.4x and even P/S lower than 1.8x are not unusual. Although, it’s not wise to just take the P/S at face value as there may be an explanation why it’s so lofty.

See our latest analysis for Samsara

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How Has Samsara Performed Recently?

Recent times have been advantageous for Samsara as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You’d really hope so, otherwise you’re paying a pretty hefty price for no particular reason.

If you’d like to see what analysts are forecasting going forward, you should check out our free report on Samsara.

Is There Enough Revenue Growth Forecasted For Samsara?

There’s an inherent assumption that a company should far outperform the industry for P/S ratios like Samsara’s to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 43%. The latest three year period has also seen an excellent 239% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 28% per annum over the next three years. With the industry only predicted to deliver 17% each year, the company is positioned for a stronger revenue result.

In light of this, it’s understandable that Samsara’s P/S sits above the majority of other companies. Apparently shareholders aren’t keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Samsara’s P/S

Samsara’s P/S has grown nicely over the last month thanks to a handy boost in the share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Samsara’s analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we’ve discovered 4 warning signs for Samsara that you should be aware of.

It’s important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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