PropertyGuru Group Limited's (NYSE:PGRU) price-to-sales (or "P/S") ratio of 5.1x may look like a poor investment opportunity when you consider close to half the companies in the Interactive Media and Services industry in the United States have P/S ratios below 1.5x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How PropertyGuru Group Has Been Performing

With revenue growth that's superior to most other companies of late, PropertyGuru Group has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

How Is PropertyGuru Group's Revenue Growth Trending?

PropertyGuru Group'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.

If we review the last year of revenue growth, the company posted a worthy increase of 14%. The latest three year period has also seen an excellent 81% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 20% per annum over the next three years. That's shaping up to be materially higher than the 12% per year growth forecast for the broader industry.

In light of this, it's understandable that PropertyGuru Group's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does PropertyGuru Group's P/S Mean For Investors?

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.

We've established that PropertyGuru Group maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Interactive Media and Services industry, as expected. 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.

Before you take the next step, you should know about the 1 warning sign for PropertyGuru Group that we have uncovered.

If these risks are making you reconsider your opinion on PropertyGuru Group, 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.