PAR Technology Corporation's (NYSE:PAR) price-to-sales (or "P/S") ratio of 3.2x may not look like an appealing investment opportunity when you consider close to half the companies in the Electronic industry in the United States have P/S ratios below 1.8x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

What Does PAR Technology's P/S Mean For Shareholders?

With its revenue growth in positive territory compared to the declining revenue of most other companies, PAR Technology has been doing quite well of late. The P/S ratio is probably high because investors think the company will continue to navigate the broader industry headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For PAR Technology?

The only time you'd be truly comfortable seeing a P/S as high as PAR Technology's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. The latest three year period has also seen an excellent 95% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 9.3% during the coming year according to the ten analysts following the company. With the industry only predicted to deliver 6.9%, the company is positioned for a stronger revenue result.

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

The Bottom Line On PAR Technology's P/S

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of PAR Technology's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for PAR Technology that you should be aware of.

If you're unsure about the strength of PAR Technology'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.