TechTarget, Inc. (NASDAQ:TTGT) shareholders won't be pleased to see that the share price has had a very rough month, dropping 30% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 42% in that time.

Although its price has dipped substantially, when almost half of the companies in the United States' Media industry have price-to-sales ratios (or "P/S") below 0.8x, you may still consider TechTarget as a stock not worth researching with its 5.5x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How TechTarget Has Been Performing

TechTarget has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for TechTarget, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For TechTarget?

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

Retrospectively, the last year delivered a decent 9.4% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 88% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 4.3%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why TechTarget's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does TechTarget's P/S Mean For Investors?

A significant share price dive has done very little to deflate TechTarget's very lofty P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that TechTarget maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 1 warning sign for TechTarget 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).

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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.