Market Participants Recognise Celsius Holdings, Inc.'s (NASDAQ:CELH) Revenues Pushing Shares 60% Higher

Celsius Holdings, Inc. (NASDAQ:CELH) shareholders have had their patience rewarded with a 60% share price jump in the last month. The annual gain comes to 159% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, when almost half of the companies in the United States' Beverage industry have price-to-sales ratios (or "P/S") below 2.6x, you may consider Celsius Holdings as a stock not worth researching with its 16.5x 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 so lofty.

Check out our latest analysis for Celsius Holdings

What Does Celsius Holdings' P/S Mean For Shareholders?

Celsius Holdings certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Celsius Holdings.

Is There Enough Revenue Growth Forecasted For Celsius Holdings?

In order to justify its P/S ratio, Celsius Holdings would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 98% last year. This great performance means it was also able to deliver immense revenue growth over the last three years. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 31% per annum as estimated by the twelve analysts watching the company. With the industry only predicted to deliver 5.5% each year, the company is positioned for a stronger revenue result.

With this information, we can see why Celsius Holdings 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.

What We Can Learn From Celsius Holdings' P/S?

Celsius Holdings' P/S has grown nicely over the last month thanks to a handy boost in the share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Celsius Holdings maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Beverage industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Celsius Holdings (at least 1 which is potentially serious), and understanding these should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.