The Price Is Right For Celsius Holdings, Inc. (NASDAQ:CELH) Even After Diving 36%

The Celsius Holdings, Inc. (NASDAQ:CELH) share price has fared very poorly over the last month, falling by a substantial 36%. Longer-term, the stock has been solid despite a difficult 30 days, gaining 25% in the last year.

In spite of the heavy fall in price, given around half the companies in the United States' Beverage industry have price-to-sales ratios (or "P/S") below 2.6x, you may still consider Celsius Holdings as a stock to avoid entirely with its 9.9x P/S ratio. 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 Celsius Holdings

How Has Celsius Holdings Performed Recently?

With revenue growth that's superior to most other companies of late, Celsius Holdings has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The High P/S Ratio?

Celsius Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 81% gain to the company's top line. This great performance means it was also able to deliver immense revenue growth over the last three years. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 28% per year during the coming three years according to the analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 5.2% per annum, which is noticeably less attractive.

With this in mind, it's not hard to understand why Celsius Holdings' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

A significant share price dive has done very little to deflate Celsius Holdings' very lofty P/S. 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.

As we suspected, our examination of Celsius Holdings' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - Celsius Holdings has 1 warning sign we think 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.

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