Unfortunately for some shareholders, the Kanzhun Limited (NASDAQ:BZ) share price has dived 25% in the last thirty days, prolonging recent pain.    The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.  

Even after such a large drop in price, when almost half of the companies in the United States' Interactive Media and Services industry have price-to-sales ratios (or "P/S") below 1.4x, you may still consider Kanzhun as a stock not worth researching with its 6.7x 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.  

NasdaqGS:BZ Price to Sales Ratio vs Industry August 8th 2024

How Kanzhun Has Been Performing

With revenue growth that's superior to most other companies of late, Kanzhun has been doing relatively well.   It seems that many are expecting the strong revenue performance to persist, which has raised the P/S.  However, if this isn't the case, investors might get caught out paying too much for the stock.    

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

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

In order to justify its P/S ratio, Kanzhun would need to produce outstanding growth that's well in excess of the industry.  

If we review the last year of revenue growth, the company posted a terrific increase of 37%.   Pleasingly, revenue has also lifted 160% 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 23% each year during the coming three years according to the analysts following the company.  With the industry only predicted to deliver 12% per annum, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Kanzhun'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.  

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

Even after such a strong price drop, Kanzhun's P/S still exceeds the industry median significantly.      It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Kanzhun's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S.  At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio.  It's hard to see the share price falling strongly in the near future under these circumstances.    

The company's balance sheet is another key area for risk analysis.  You can assess many of the main risks through our free balance sheet analysis for Kanzhun with six simple checks.  

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).