The Planet Labs PBC (NYSE:PL) share price has done very well over the last month, posting an excellent gain of 32%. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

After such a large jump in price, when almost half of the companies in the United States' Professional Services industry have price-to-sales ratios (or "P/S") below 1.6x, you may consider Planet Labs PBC as a stock not worth researching with its 3.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

What Does Planet Labs PBC's Recent Performance Look Like?

Recent revenue growth for Planet Labs PBC has been in line with the industry. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

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

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. Pleasingly, revenue has also lifted 97% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 15% as estimated by the ten analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 6.9%, which is noticeably less attractive.

In light of this, it's understandable that Planet Labs PBC'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.

What We Can Learn From Planet Labs PBC's P/S?

The strong share price surge has lead to Planet Labs PBC's P/S soaring as well. 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.

As we suspected, our examination of Planet Labs PBC'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.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Planet Labs PBC you should know about.

If you're unsure about the strength of Planet Labs PBC's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.