Prenetics Global Limited's (NASDAQ:PRE) P/S Is Still On The Mark Following 32% Share Price Bounce

Prenetics Global Limited (NASDAQ:PRE) shareholders have had their patience rewarded with a 32% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 37% in the last year.

Since its price has surged higher, given close to half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1.1x, you may consider Prenetics Global as a stock to potentially avoid with its 2.8x 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 as high as it is.

View our latest analysis for Prenetics Global

How Has Prenetics Global Performed Recently?

Prenetics Global hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

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

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Prenetics Global would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a frustrating 91% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 89% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 234% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 8.3% growth forecast for the broader industry.

With this information, we can see why Prenetics Global 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 Prenetics Global's P/S

The large bounce in Prenetics Global's shares has lifted the company's P/S handsomely. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into Prenetics Global 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 these conditions change, they will continue to provide strong support to the share price.

You should always think about risks. Case in point, we've spotted 3 warning signs for Prenetics Global 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.