Investors Give Yatsen Holding Limited (NYSE:YSG) Shares A 29% Hiding

Yatsen Holding Limited (NYSE:YSG) shares have had a horrible month, losing 29% after a relatively good period beforehand. The recent drop has obliterated the annual return, with the share price now down 9.8% over that longer period.

After such a large drop in price, when close to half the companies operating in the United States' Personal Products industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider Yatsen Holding as an enticing stock to check out with its 0.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Yatsen Holding

What Does Yatsen Holding's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Yatsen Holding's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Yatsen Holding's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Yatsen Holding's Revenue Growth Trending?

Yatsen Holding's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 47% overall from three years ago. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 9.7% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 2.5%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Yatsen Holding's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Yatsen Holding's recently weak share price has pulled its P/S back below other Personal Products companies. 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.

To us, it seems Yatsen Holding currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Before you settle on your opinion, we've discovered 1 warning sign for Yatsen Holding 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.