Despite an already strong run, Katapult Holdings, Inc. (NASDAQ:KPLT) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Although its price has surged higher, given about half the companies operating in the United States' Consumer Finance industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider Katapult Holdings as an attractive investment with its 0.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Has Katapult Holdings Performed Recently?

Katapult Holdings could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Katapult Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Katapult Holdings would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 9.4% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 34%, which is noticeably more attractive.

With this in consideration, its clear as to why Katapult Holdings' P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

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

The latest share price surge wasn't enough to lift Katapult Holdings' P/S close to the industry median. 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.

We've established that Katapult Holdings maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Don't forget that there may be other risks. For instance, we've identified 6 warning signs for Katapult Holdings (2 are a bit concerning) you should be aware of.

If you're unsure about the strength of Katapult Holdings' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.