Future FinTech Group Inc. (NASDAQ:FTFT) Stock Rockets 32% But Many Are Still Ignoring The Company

Future FinTech Group Inc. (NASDAQ:FTFT) shares have continued their recent momentum with a 32% gain in the last month alone. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 41% over that time.

Even after such a large jump in price, Future FinTech Group may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.2x, since almost half of all companies in the Diversified Financial industry in the United States have P/S ratios greater than 2.7x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Future FinTech Group

What Does Future FinTech Group's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Future FinTech Group has been doing very well. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Future FinTech Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Future FinTech Group's earnings, revenue and cash flow.

How Is Future FinTech Group's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 85%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.5% shows it's noticeably more attractive.

With this information, we find it odd that Future FinTech Group is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Future FinTech Group's P/S Mean For Investors?

Even after such a strong price move, Future FinTech Group's P/S still trails the rest of the industry. 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 Future FinTech Group revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Future FinTech Group (3 are concerning!) that you need to be mindful 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.