Planet Labs PBC (NYSE:PL) shares have retraced a considerable 28% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 24% in that time.

Even after such a large drop in price, you could still be forgiven for thinking Planet Labs PBC is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.6x, considering almost half the companies in the United States' Professional Services industry have P/S ratios below 1.5x. 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.

How Planet Labs PBC Has Been Performing

Planet Labs PBC'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.

Is There Enough Revenue Growth Forecasted For Planet Labs PBC?

The only time you'd be truly comfortable seeing a P/S as high as Planet Labs PBC's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. This was backed up an excellent period prior to see revenue up by 97% in total over the last three years. 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 year should generate growth of 15% as estimated by the eleven analysts watching the company. That's shaping up to be materially higher than the 6.2% growth forecast for the broader industry.

In light of this, it's understandable that Planet Labs PBC'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.

The Final Word

There's still some elevation in Planet Labs PBC's P/S, even if the same can't be said for its share price recently. 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.

Our look into Planet Labs PBC shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Planet Labs PBC you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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