Grindr Inc.'s (NYSE:GRND) price-to-sales (or "P/S") ratio of 8.1x may look like a poor investment opportunity when you consider close to half the companies in the Interactive Media and Services industry in the United States have P/S ratios below 1.3x. 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.

How Has Grindr Performed Recently?

Grindr certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

How Is Grindr's Revenue Growth Trending?

In order to justify its P/S ratio, Grindr 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 32%. The strong recent performance means it was also able to grow revenue by 119% in total over the last three years. 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 22% per annum during the coming three years according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 12% per year, which is noticeably less attractive.

With this in mind, it's not hard to understand why Grindr'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 We Can Learn From Grindr's P/S?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Grindr'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. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Grindr you should know about.

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.