Coherent Corp. (NYSE:COHR) shareholders have had their patience rewarded with a 40% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 46%.

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 2.6x, you may consider Coherent as a stock probably not worth researching with its 4.1x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

How Has Coherent Performed Recently?

There hasn't been much to differentiate Coherent's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Is There Enough Revenue Growth Forecasted For Coherent?

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

Retrospectively, the last year delivered an exceptional 21% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 56% in total over the last three years. 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 11% over the next year. Meanwhile, the rest of the industry is forecast to expand by 15%, which is noticeably more attractive.

With this in consideration, we believe it doesn't make sense that Coherent's P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Bottom Line On Coherent's P/S

Coherent's P/S is on the rise since its shares have risen strongly. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It comes as a surprise to see Coherent trade at such a high P/S given the revenue forecasts look less than stellar. When we see a weak revenue outlook, we suspect the share price faces a much greater risk of declining, bringing back down the P/S figures. This places shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.

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.