Yatsen Holding Limited (NYSE:YSG) shares have had a really impressive month, gaining 104% after a shaky period beforehand.    While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.  

Although its price has surged higher, Yatsen Holding's price-to-sales (or "P/S") ratio of 1x might still make it look like a buy right now compared to the Personal Products industry in the United States, where around half of the companies have P/S ratios above 1.7x and even P/S above 4x are quite common.   However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.  

NYSE:YSG Price to Sales Ratio vs Industry April 25th 2024

What Does Yatsen Holding's P/S Mean For Shareholders?

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 P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon.  If this is the case, then existing shareholders will probably struggle to get excited about the future direction 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.

Is There Any Revenue Growth Forecasted For Yatsen Holding?  

The only time you'd be truly comfortable seeing a P/S as low as Yatsen Holding's is when the company's growth is on track to lag the industry.  

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 7.9%.   The last three years don't look nice either as the company has shrunk revenue by 35% in aggregate.  Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.  

Looking ahead now, revenue is anticipated to climb by 9.6% per annum during the coming three years according to the three analysts following the company.  With the industry only predicted to deliver 6.0% per annum, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Yatsen Holding's P/S sits behind most of its industry peers.  Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.  

What We Can Learn From Yatsen Holding's P/S?

The latest share price surge wasn't enough to lift Yatsen Holding's P/S close to the industry median.      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.

A look at Yatsen Holding's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect.  There could be some major risk factors that are placing downward pressure on the P/S ratio.  It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.    

And what about other risks? Every company has them, and we've spotted   1 warning sign for Yatsen Holding  you should know about.  

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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