Hesai Group (NASDAQ:HSAI) Stocks Shoot Up 31% But Its P/S Still Looks Reasonable

Despite an already strong run, Hesai Group (NASDAQ:HSAI) shares have been powering on, with a gain of 31% in the last thirty days. This latest share price bounce rounds out a remarkable 578% gain over the last twelve months.

After such a large jump in price, given around half the companies in the United States' Auto Components industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Hesai Group as a stock to avoid entirely with its 10.2x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

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See our latest analysis for Hesai Group

How Has Hesai Group Performed Recently?

With revenue growth that's superior to most other companies of late, Hesai Group has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Hesai Group's Revenue Growth Trending?

In order to justify its P/S ratio, Hesai Group would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered an exceptional 37% gain to the company's top line. Pleasingly, revenue has also lifted 163% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 44% per 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 16% each year, which is noticeably less attractive.

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 Key Takeaway

Shares in Hesai Group have seen a strong upwards swing lately, which has really helped boost its P/S figure. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Hesai Group shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Hesai Group 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.