Despite an already strong run, Rocket Lab USA, Inc. (NASDAQ:RKLB) shares have been powering on, with a gain of 115% in the last thirty days. The last 30 days were the cherry on top of the stock's 463% gain in the last year, which is nothing short of spectacular.

Following the firm bounce in price, you could be forgiven for thinking Rocket Lab USA is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 33.1x, considering almost half the companies in the United States' Aerospace & Defense industry have P/S ratios below 2.6x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How Rocket Lab USA Has Been Performing

Recent times have been advantageous for Rocket Lab USA as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Rocket Lab USA would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an exceptional 54% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 48% each year over the next three years. That's shaping up to be materially higher than the 3.2% per year growth forecast for the broader industry.

With this information, we can see why Rocket Lab USA is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Rocket Lab USA's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

We've established that Rocket Lab USA maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Aerospace & Defense industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

It is also worth noting that we have found 3 warning signs for Rocket Lab USA that you need to take into consideration.

If you're unsure about the strength of Rocket Lab USA'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.