BlackSky Technology Inc. (NYSE:BKSY) shares have had a really impressive month, gaining 39% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 92% in the last year.

After such a large jump in price, given around half the companies in the United States' Professional Services industry have price-to-sales ratios (or "P/S") below 1.3x, you may consider BlackSky Technology as a stock to avoid entirely with its 9.4x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How Has BlackSky Technology Performed Recently?

While the industry has experienced revenue growth lately, BlackSky Technology's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. 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 BlackSky Technology.

Is There Enough Revenue Growth Forecasted For BlackSky Technology?

The only time you'd be truly comfortable seeing a P/S as steep as BlackSky Technology's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 5.1% decrease to the company's top line. Still, the latest three year period has seen an excellent 77% overall rise in revenue, in spite of its unsatisfying short-term performance. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 29% per annum over the next three years. That's shaping up to be materially higher than the 6.5% per year growth forecast for the broader industry.

With this in mind, it's not hard to understand why BlackSky Technology's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The strong share price surge has lead to BlackSky Technology's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that BlackSky Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Professional Services industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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.