Market Participants Recognise Kura Sushi USA, Inc.'s (NASDAQ:KRUS) Revenues Pushing Shares 31% Higher

Kura Sushi USA, Inc. (NASDAQ:KRUS) shares have continued their recent momentum with a 31% gain in the last month alone. Taking a wider view, although not as strong as the last month, the full year gain of 17% is also fairly reasonable.

Following the firm bounce in price, you could be forgiven for thinking Kura Sushi USA is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4x, considering almost half the companies in the United States' Hospitality industry have P/S ratios below 1.5x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Kura Sushi USA

How Kura Sushi USA Has Been Performing

Kura Sushi USA certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as Kura Sushi USA's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 21% over the next year. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.

With this information, we can see why Kura Sushi USA is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Bottom Line On Kura Sushi USA's P/S

The strong share price surge has lead to Kura Sushi USA's P/S soaring as well. 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 look into Kura Sushi USA shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 2 warning signs for Kura Sushi USA that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.