Market Participants Recognise Hesai Group's (NASDAQ:HSAI) Revenues Pushing Shares 32% Higher

Despite an already strong run, Hesai Group (NASDAQ:HSAI) shares have been powering on, with a gain of 32% in the last thirty days. This latest share price bounce rounds out a remarkable 439% gain over the last twelve months.

After such a large jump in price, when almost half of the companies in the United States' Auto Components industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider Hesai Group as a stock not worth researching with its 9.5x 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.

Check out our latest analysis for Hesai Group

What Does Hesai Group's Recent Performance Look Like?

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.

What Are Revenue Growth Metrics Telling Us About The High P/S?

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

If we review the last year of revenue growth, the company posted a worthy increase of 11%. Pleasingly, revenue has also lifted 208% 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.

Looking ahead now, revenue is anticipated to climb by 46% per annum during the coming three years according to the ten analysts following the company. With the industry only predicted to deliver 40% each year, the company is positioned for a stronger revenue result.

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.

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

Shares in Hesai Group have seen a strong upwards swing lately, which has really helped boost its P/S figure. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Hesai Group maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Auto Components industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

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

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

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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.