Investors Still Aren't Entirely Convinced By Microvast Holdings, Inc.'s (NASDAQ:MVST) Revenues Despite 61% Price Jump

Microvast Holdings, Inc. (NASDAQ:MVST) shares have continued their recent momentum with a 61% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 61% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Microvast Holdings' price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S in the United States' Machinery industry is similar at about 1.5x. 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.

View our latest analysis for Microvast Holdings

What Does Microvast Holdings' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Microvast Holdings has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Microvast Holdings' to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 39% last year. The strong recent performance means it was also able to grow revenue by 178% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should demonstrate the company's robustness, generating growth of 20% as estimated by the one analyst watching the company. With the rest of the industry predicted to shrink by 0.7%, that would be a fantastic result.

In light of this, it's peculiar that Microvast Holdings' P/S sits in-line with the majority of other companies. Apparently some shareholders are skeptical of the contrarian forecasts and have been accepting lower selling prices.

The Final Word

Microvast Holdings appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

Our examination of Microvast Holdings' analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't resulting in the company trading at a higher P/S, as per our expectations. Given the glowing revenue forecasts, we can only assume potential risks are what might be capping the P/S ratio at its current levels. One such risk is that the company may not live up to analysts' revenue trajectories in tough industry conditions. It appears some are indeed anticipating revenue instability, because the company's current prospects should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Microvast Holdings (2 are a bit unpleasant!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.