When close to half the companies in the Auto industry in the United States have price-to-sales ratios (or "P/S") below 1.4x, you may consider LiveWire Group, Inc. (NYSE:LVWR) as a stock to avoid entirely with its 36.4x 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 LiveWire Group's Recent Performance Look Like?

For instance, LiveWire Group's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. If not, then existing shareholders may be quite nervous about the viability of the share price.

Do Revenue Forecasts Match The High P/S Ratio?

LiveWire Group's 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.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 10%. Even so, admirably revenue has lifted 93% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 14% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why LiveWire Group is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does LiveWire Group's P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of LiveWire Group revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. 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.

There are also other vital risk factors to consider and we've discovered 2 warning signs for LiveWire Group (1 is potentially serious!) that you should be aware of before investing here.

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.