LiveRamp Holdings, Inc.'s (NYSE:RAMP) price-to-sales (or "P/S") ratio of 3.2x might make it look like a buy right now compared to the Software industry in the United States, where around half of the companies have P/S ratios above 4.6x and even P/S above 12x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How LiveRamp Holdings Has Been Performing

With revenue growth that's inferior to most other companies of late, LiveRamp Holdings has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

How Is LiveRamp Holdings' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as LiveRamp Holdings' is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. The latest three year period has also seen an excellent 49% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 11% each year during the coming three years according to the seven analysts following the company. That's shaping up to be materially lower than the 14% per annum growth forecast for the broader industry.

In light of this, it's understandable that LiveRamp Holdings' P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does LiveRamp Holdings' P/S Mean For Investors?

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 expected, our analysis of LiveRamp Holdings' analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for LiveRamp Holdings you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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