Jim Cramer supports Snowflake as a stock pick, but issues arise regarding its valuation and growth. The price-to-sales ratio is nearly 20, and the forward P/E ratio stands at 196, with both metrics rising following a 40% year-to-date increase in stock price. In Q1 FY26, revenue growth was just 26% year-over-year, with remaining performance obligations growing by 34% to $6.7 billion. The rapid deceleration in growth rates paired with excessive valuations suggests that Snowflake may not be able to sustain long-term returns expected by investors.
Snowflake suffers from a lofty price-to-sales ratio that's hovering near 20. Furthermore, the company is currently sporting a 196 forward P/E ratio. Both of those metrics are up considerably since the stock's 40% year-to-date run.
Snowflake is in the right industry for long-term growth, but its growth rates do not support a price-to-sales ratio that's closing in on 20. The firm's revenue growth rate has been steadily decelerating.
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