To the annoyance of some shareholders, NaaS Technology Inc. (NASDAQ:NAAS) shares are down a considerable 35% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 74% share price decline.

In spite of the heavy fall in price, you could still be forgiven for thinking NaaS Technology is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6.7x, considering almost half the companies in the United States' Specialty Retail industry have P/S ratios below 0.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

What Does NaaS Technology's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, NaaS Technology has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For NaaS Technology?

NaaS Technology's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an explosive gain to the company's top line. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 602% over the next year. That's shaping up to be materially higher than the 4.6% growth forecast for the broader industry.

With this in mind, it's not hard to understand why NaaS 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 Bottom Line On NaaS Technology's P/S

Even after such a strong price drop, NaaS Technology's P/S still exceeds the industry median significantly. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that NaaS Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Specialty Retail industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You always need to take note of risks, for example - NaaS Technology has 3 warning signs we think you should be aware of.

If you're unsure about the strength of NaaS Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.