Evolv Technologies Holdings, Inc. (NASDAQ:EVLV) shareholders have had their patience rewarded with a 29% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 83% in the last year.

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 1.9x, you may consider Evolv Technologies Holdings as a stock not worth researching with its 10.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

How Evolv Technologies Holdings Has Been Performing

Evolv Technologies Holdings certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Enough Revenue Growth Forecasted For Evolv Technologies Holdings?

Evolv Technologies Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 94%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 44% each year over the next three years. That's shaping up to be materially higher than the 18% per annum growth forecast for the broader industry.

In light of this, it's understandable that Evolv Technologies Holdings' 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 Key Takeaway

Shares in Evolv Technologies Holdings have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Our look into Evolv Technologies Holdings 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. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You always need to take note of risks, for example - Evolv Technologies Holdings has 2 warning signs we think you should be aware of.

If these risks are making you reconsider your opinion on Evolv Technologies Holdings, 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.