Why Investors Shouldn't Be Surprised By HelloFresh SE's (ETR:HFG) 26% Share Price Surge

HelloFresh SE (ETR:HFG) shareholders have had their patience rewarded with a 26% share price jump in the last month. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 72% share price drop in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think HelloFresh's price-to-sales (or "P/S") ratio of 0.2x is worth a mention when it essentially matches the median P/S in Germany's Consumer Retailing industry. 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.

Check out our latest analysis for HelloFresh

How Has HelloFresh Performed Recently?

Recent times haven't been great for HelloFresh as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. However, a few strong years before that means that it was still able to grow revenue by an impressive 51% in total over the last three years. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 4.7% per year over the next three years. With the industry predicted to deliver 5.1% growth each year, the company is positioned for a comparable revenue result.

In light of this, it's understandable that HelloFresh's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What Does HelloFresh's P/S Mean For Investors?

HelloFresh's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A HelloFresh's P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Consumer Retailing industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

We don't want to rain on the parade too much, but we did also find 1 warning sign for HelloFresh that you need to be mindful of.

If you're unsure about the strength of HelloFresh's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.