Despite an already strong run, Pure Storage, Inc. (NYSE:PSTG) shares have been powering on, with a gain of 28% in the last thirty days. The last month tops off a massive increase of 116% in the last year.

Following the firm bounce in price, you could be forgiven for thinking Pure Storage is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.9x, considering almost half the companies in the United States' Tech industry have P/S ratios below 1.4x. 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 Pure Storage's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Pure Storage has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For Pure Storage?

Pure Storage'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 2.8%. This was backed up an excellent period prior to see revenue up by 68% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 11% each year over the next three years. That's shaping up to be materially higher than the 5.0% per annum growth forecast for the broader industry.

In light of this, it's understandable that Pure Storage'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 Pure Storage's P/S Mean For Investors?

The strong share price surge has lead to Pure Storage's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Pure Storage maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Tech industry, as expected. 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.

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

If you're unsure about the strength of Pure Storage'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.