Despite an already strong run, Xometry, Inc. (NASDAQ:XMTR) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 27% in the last year.

Following the firm bounce in price, you could be forgiven for thinking Xometry is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.2x, considering almost half the companies in the United States' Trade Distributors 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.

What Does Xometry's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Xometry 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Xometry.

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 Xometry's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. Pleasingly, revenue has also lifted 188% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 18% per year during the coming three years according to the ten analysts following the company. That's shaping up to be materially higher than the 6.1% per annum growth forecast for the broader industry.

In light of this, it's understandable that Xometry'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 Final Word

Xometry's P/S is on the rise since its shares have risen strongly. 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 Xometry maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Trade Distributors industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Having said that, be aware Xometry is showing 3 warning signs in our investment analysis, you should know about.

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