Latham Group, Inc.'s (NASDAQ:SWIM) 25% Jump Shows Its Popularity With Investors

Latham Group, Inc. (NASDAQ:SWIM) shareholders have had their patience rewarded with a 25% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 27% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Latham Group's P/S ratio of 0.7x, since the median price-to-sales (or "P/S") ratio for the Leisure industry in the United States is also close to 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Latham Group

What Does Latham Group's Recent Performance Look Like?

Latham Group has been struggling lately as its revenue has declined faster than most other companies. Perhaps the market is expecting future revenue performance to begin matching the rest of the industry, which has kept the P/S from declining. You'd much rather the company improve its revenue if you still believe in the business. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

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

How Is Latham Group's Revenue Growth Trending?

Latham Group's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 19%. Even so, admirably revenue has lifted 40% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 0.03% per annum as estimated by the seven analysts watching the company. That's shaping up to be similar to the 1.7% per year growth forecast for the broader industry.

With this in mind, it makes sense that Latham Group's P/S is closely matching its industry peers. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Latham Group's P/S

Latham Group appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

We've seen that Latham Group maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Latham Group (1 doesn't sit too well with us) you should be aware of.

If you're unsure about the strength of Latham 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.