Ouster, Inc. (NYSE:OUST) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. The last 30 days bring the annual gain to a very sharp 88%.

Following the firm bounce in price, when almost half of the companies in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2x, you may consider Ouster as a stock probably not worth researching with its 3.8x 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 as high as it is.

How Has Ouster Performed Recently?

Recent times have been pleasing for Ouster as its revenue has risen in spite of the industry's average revenue going into reverse. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

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

Taking a look back first, we see that the company grew revenue by an impressive 69% last year. The strong recent performance means it was also able to grow revenue by 279% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 44% per annum as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 12% per annum, which is noticeably less attractive.

With this in mind, it's not hard to understand why Ouster's 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 Key Takeaway

Ouster shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Ouster maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic 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.

Before you take the next step, you should know about the 3 warning signs for Ouster that we have uncovered.

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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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.