Reddit, Inc. (NYSE:RDDT) Stocks Pounded By 27% But Not Lagging Industry On Growth Or Pricing
Reddit, Inc. (NYSE:RDDT) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. The good news is that in the last year, the stock has shone bright like a diamond, gaining 141%.
In spite of the heavy fall in price, you could still be forgiven for thinking Reddit is a stock to steer clear of with a price-to-sales ratios (or “P/S”) of 21.9x, considering almost half the companies in the United States’ Interactive Media and Services industry have P/S ratios below 1.4x. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
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NYSE:RDDT Price to Sales Ratio vs Industry October 18th 2025
How Has Reddit Performed Recently?
With revenue growth that’s superior to most other companies of late, Reddit has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn’t the case, investors might get caught out paying too much for the stock.
If you’d like to see what analysts are forecasting going forward, you should check out our free report on Reddit.
How Is Reddit’s Revenue Growth Trending?
There’s an inherent assumption that a company should far outperform the industry for P/S ratios like Reddit’s to be considered reasonable.
If we review the last year of revenue growth, the company posted a terrific increase of 70%. The latest three year period has also seen an excellent 181% overall rise in revenue, aided by its short-term performance. 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 34% per annum during the coming three years according to the analysts following the company. That’s shaping up to be materially higher than the 13% each year growth forecast for the broader industry.
With this in mind, it’s not hard to understand why Reddit’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 Does Reddit’s P/S Mean For Investors?
Even after such a strong price drop, Reddit’s P/S still exceeds the industry median significantly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.
We’ve established that Reddit maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Interactive Media and Services industry, as expected. It appears that shareholders are confident in the company’s future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
The company’s balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Reddit with six simple checks.
Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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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.
