Hesai Group (NASDAQ:HSAI) Looks Just Right With A 40% Price Jump

Hesai Group (NASDAQ:HSAI) shares have had a really impressive month, gaining 40% after a shaky period beforehand. This latest share price bounce rounds out a remarkable 362% gain over the last twelve months.

Following the firm bounce in price, when almost half of the companies in the United States' Auto Components industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider Hesai Group as a stock not worth researching with its 9.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

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Check out our latest analysis for Hesai Group

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

Recent times have been pleasing for Hesai Group as its revenue has risen in spite of the industry's average revenue going into reverse. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Hesai Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Hesai Group's is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. Pleasingly, revenue has also lifted 188% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the analysts covering the company suggest revenue should grow by 42% per year over the next three years. That's shaping up to be materially higher than the 19% per annum growth forecast for the broader industry.

In light of this, it's understandable that Hesai Group's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

Hesai Group's P/S has grown nicely over the last month thanks to a handy boost in the share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Hesai Group's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

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

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.