Zeta Global Holdings Corp. (NYSE:ZETA) shareholders that were waiting for something to happen have been dealt a blow with a 25% share price drop in the last month. The good news is that in the last year, the stock has shone bright like a diamond, gaining 135%.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Zeta Global Holdings' P/S ratio of 5.3x, since the median price-to-sales (or "P/S") ratio for the Software industry in the United States is also close to 5.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does Zeta Global Holdings' P/S Mean For Shareholders?

Recent times have been advantageous for Zeta Global Holdings as its revenues have been rising faster than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on Zeta Global Holdings will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Zeta Global Holdings?

The only time you'd be comfortable seeing a P/S like Zeta Global Holdings' is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 30%. The strong recent performance means it was also able to grow revenue by 106% 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 20% per annum as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 21% each year, which is not materially different.

With this information, we can see why Zeta Global Holdings is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Zeta Global Holdings' P/S

With its share price dropping off a cliff, the P/S for Zeta Global Holdings looks to be in line with the rest of the Software industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

A Zeta Global Holdings' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Software industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Zeta Global Holdings that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.