AdTheorent Holding Company, Inc. (NASDAQ:ADTH) shares have continued their recent momentum with a 33% gain in the last month alone.    The last month tops off a massive increase of 143% in the last year.  

Since its price has surged higher, you could be forgiven for thinking AdTheorent Holding Company is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2x, considering almost half the companies in the United States' Media industry have P/S ratios below 1x.   Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.  

NasdaqCM:ADTH Price to Sales Ratio vs Industry March 15th 2024

How AdTheorent Holding Company Has Been Performing

AdTheorent Holding Company's revenue growth of late has been pretty similar to most other companies.   It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling.  If not, then existing shareholders may be a little nervous about the viability of the share price.    

Want the full picture on analyst estimates for the company? Then our free report on AdTheorent Holding Company will help you uncover what's on the horizon.  

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

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

Retrospectively, the last year delivered a decent 2.8% gain to the company's revenues.   The latest three year period has also seen an excellent 41% overall rise in revenue, aided somewhat by its short-term performance.  So we can start by confirming that the company has done a great job of growing revenues over that time.  

Turning to the outlook, the next three years should generate growth of 11%  each year as estimated by the five analysts watching the company.  That's shaping up to be materially higher than the 4.1% per year growth forecast for the broader industry.

In light of this, it's understandable that AdTheorent Holding Company's P/S sits above the majority of other companies.  It seems most investors are expecting this strong future growth and are willing to pay more for the stock.  

The Bottom Line On AdTheorent Holding Company's P/S

The large bounce in AdTheorent Holding Company's shares has lifted the company's P/S handsomely.      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.

We've established that AdTheorent Holding Company maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Media industry, as expected.  Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat.  Unless these conditions change, they will continue to provide strong support to the share price.    

We don't want to rain on the parade too much, but we did also find 4 warning signs for AdTheorent Holding Company that you need to be mindful of.  

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.