Investors Appear Satisfied With Ouster, Inc.'s (NYSE:OUST) Prospects As Shares Rocket 43%

Ouster Inc Ordinary Shares - Class A -1.73%

Ouster Inc Ordinary Shares - Class A

OUST

10.78

-1.73%

Ouster, Inc. (NYSE:OUST) shareholders would be excited to see that the share price has had a great month, posting a 43% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

After such a large jump in price, when almost half of the companies in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2x, you may consider Ouster as a stock probably not worth researching with its 3.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Ouster

ps-multiple-vs-industry
NYSE:OUST Price to Sales Ratio vs Industry March 29th 2024

How Has Ouster Performed Recently?

With its revenue growth in positive territory compared to the declining revenue of most other companies, Ouster has been doing quite well of late. Perhaps the market is expecting the company's future revenue growth to buck the trend of the industry, contributing to a higher P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Ouster's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Ouster's Revenue Growth Trending?

Ouster's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 103% 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.

Turning to the outlook, the next three years should generate growth of 53% each year as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.2% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Ouster's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Ouster's P/S?

The large bounce in Ouster's shares has lifted the company's P/S handsomely. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Ouster'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.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Ouster 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).

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