Taboola.com Ltd. (NASDAQ:TBLA) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking further back, the 11% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, there still wouldn't be many who think Taboola.com's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S in the United States' Interactive Media and Services industry is similar at about 1.3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does Taboola.com's Recent Performance Look Like?

Taboola.com certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Taboola.com would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. Revenue has also lifted 28% in aggregate from three years ago, mostly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 16% each year during the coming three years according to the seven analysts following the company. That's shaping up to be materially higher than the 12% per annum growth forecast for the broader industry.

With this information, we find it interesting that Taboola.com is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Taboola.com's P/S Mean For Investors?

Taboola.com appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, Taboola.com's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Taboola.com with six simple checks will allow you to discover any risks that could be an issue.

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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