Market Might Still Lack Some Conviction On Yatsen Holding Limited (NYSE:YSG) Even After 43% Share Price Boost

Yatsen Holding Limited (NYSE:YSG) shareholders would be excited to see that the share price has had a great month, posting a 43% gain and recovering from prior weakness. The last month tops off a massive increase of 166% in the last year.

Although its price has surged higher, there still wouldn't be many who think Yatsen Holding's price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S in the United States' Personal Products industry is similar at about 1.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Yatsen Holding

How Has Yatsen Holding Performed Recently?

Yatsen Holding could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Yatsen Holding's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. This isn't what shareholders were looking for as it means they've been left with a 42% decline in revenue over the last three years in total. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 10% during the coming year according to the three analysts following the company. That's shaping up to be materially higher than the 0.3% growth forecast for the broader industry.

In light of this, it's curious that Yatsen Holding's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Yatsen Holding's P/S

Its shares have lifted substantially and now Yatsen Holding's P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Despite enticing revenue growth figures that outpace the industry, Yatsen Holding's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Plus, you should also learn about these 2 warning signs we've spotted with Yatsen Holding.

If these risks are making you reconsider your opinion on Yatsen Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.