The Freightos Limited (NASDAQ:CRGO) share price has done very well over the last month, posting an excellent gain of 26%. But the last month did very little to improve the 69% share price decline over the last year.

Following the firm bounce in price, given around half the companies in the United States' Logistics industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider Freightos as a stock to avoid entirely with its 7.6x 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 so lofty.

Check out our latest analysis for Freightos

What Does Freightos' Recent Performance Look Like?

Freightos certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. 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.

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

Retrospectively, the last year delivered a decent 15% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 134% in total over the last three years. 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 34% per annum as estimated by the three analysts watching the company. With the industry only predicted to deliver 4.2% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Freightos' 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.

The Final Word

Freightos' P/S has grown nicely over the last month thanks to a handy boost in the share price. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our look into Freightos shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 2 warning signs we've spotted with Freightos (including 1 which doesn't sit too well with us).

If these risks are making you reconsider your opinion on Freightos, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.