GEN Restaurant Group, Inc.'s (NASDAQ:GENK) Shares Leap 28% Yet They're Still Not Telling The Full Story

Despite an already strong run, GEN Restaurant Group, Inc. (NASDAQ:GENK) shares have been powering on, with a gain of 28% in the last thirty days. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, given about half the companies operating in the United States' Hospitality industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider GEN Restaurant Group as an attractive investment with its 0.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for GEN Restaurant Group

What Does GEN Restaurant Group's Recent Performance Look Like?

GEN Restaurant Group could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

Keen to find out how analysts think GEN Restaurant Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is GEN Restaurant Group's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like GEN Restaurant Group's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 11%. This was backed up an excellent period prior to see revenue up by 189% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 12% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 14%, which is not materially different.

With this in consideration, we find it intriguing that GEN Restaurant Group's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On GEN Restaurant Group's P/S

GEN Restaurant Group's stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of GEN Restaurant Group's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you settle on your opinion, we've discovered 3 warning signs for GEN Restaurant Group that you should be aware of.

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.