Yü Group PLC (LON:YU.) Stock Rockets 34% As Investors Are Less Pessimistic Than Expected

Yü Group PLC (LON:YU.) shareholders would be excited to see that the share price has had a great month, posting a 34% gain and recovering from prior weakness. The last month tops off a massive increase of 171% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Yü Group's price-to-sales (or "P/S") ratio of 0.6x is worth a mention when the median P/S in the United Kingdom's Renewable Energy industry is similar at about 0.2x. 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.

See our latest analysis for Yü Group

What Does Yü Group's P/S Mean For Shareholders?

Yü Group certainly has been doing a good job lately as its revenue growth has been positive while most other companies have been seeing their revenue go backwards. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. Those who are bullish on Yü Group will be hoping that this isn't the case, so that they can pick up the stock at a slightly lower valuation.

Want the full picture on analyst estimates for the company? Then our free report on Yü Group will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Yü Group?

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

Taking a look back first, we see that the company grew revenue by an impressive 65% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 25% per year during the coming three years according to the dual analysts following the company. With the industry predicted to deliver 77% growth each year, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Yü Group is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than analysts indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

The Bottom Line On Yü Group's P/S

Yü Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Given that Yü Group's revenue growth projections are relatively subdued in comparison to the wider industry, it comes as a surprise to see it trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware Yü Group is showing 2 warning signs in our investment analysis, you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.