Chanson International Holding (NASDAQ:CHSN) Stocks Shoot Up 55% But Its P/S Still Looks Reasonable

Chanson International Holding (NASDAQ:CHSN) shares have continued their recent momentum with a 55% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 53%.

Since its price has surged higher, you could be forgiven for thinking Chanson International Holding is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2x, considering almost half the companies in the United States' Consumer Retailing industry have P/S ratios below 0.4x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Chanson International Holding

How Has Chanson International Holding Performed Recently?

Revenue has risen firmly for Chanson International Holding recently, which is pleasing to see. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Chanson International Holding will help you shine a light on its historical performance.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Chanson International Holding's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. The latest three year period has also seen an excellent 67% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 5.4% shows it's noticeably more attractive.

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

What Does Chanson International Holding's P/S Mean For Investors?

Chanson International Holding's P/S is on the rise since its shares have risen strongly. 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.

It's no surprise that Chanson International Holding can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Before you take the next step, you should know about the 4 warning signs for Chanson International Holding that we have uncovered.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com