Market Might Still Lack Some Conviction On Seres Group Co.,Ltd (SHSE:601127) Even After 33% Share Price Boost

Seres Group Co.,Ltd (SHSE:601127) shareholders have had their patience rewarded with a 33% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 34%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Seres GroupLtd's P/S ratio of 1.8x, since the median price-to-sales (or "P/S") ratio for the Auto industry in China is about the same. 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.

View our latest analysis for Seres GroupLtd

What Does Seres GroupLtd's P/S Mean For Shareholders?

Seres GroupLtd 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 not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Seres GroupLtd.

How Is Seres GroupLtd's Revenue Growth Trending?

Seres GroupLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 175% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 33% each year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 26% per annum, which is noticeably less attractive.

With this information, we find it interesting that Seres GroupLtd 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 Seres GroupLtd's P/S Mean For Investors?

Seres GroupLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Seres GroupLtd currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 1 warning sign for Seres GroupLtd that we have uncovered.

If these risks are making you reconsider your opinion on Seres GroupLtd, 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.