Autozi Internet Technology (Global) Ltd. (NASDAQ:AZI) Stocks Shoot Up 44% But Its P/S Still Looks Reasonable

Autozi Internet Technology (Global) Ltd. (NASDAQ:AZI) shareholders would be excited to see that the share price has had a great month, posting a 44% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

Following the firm bounce in price, when almost half of the companies in the United States' Specialty Retail industry have price-to-sales ratios (or "P/S") below 0.3x, you may consider Autozi Internet Technology (Global) as a stock probably not worth researching with its 0.8x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Autozi Internet Technology (Global)

How Autozi Internet Technology (Global) Has Been Performing

The revenue growth achieved at Autozi Internet Technology (Global) over the last year would be more than acceptable for most companies. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. If not, then existing shareholders may be a little nervous about the viability of the share price.

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 Autozi Internet Technology (Global)'s earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The High P/S?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Autozi Internet Technology (Global)'s to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.9% last year. Pleasingly, revenue has also lifted 86% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 4.8% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Autozi Internet Technology (Global)'s P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does Autozi Internet Technology (Global)'s P/S Mean For Investors?

Autozi Internet Technology (Global) shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Autozi Internet Technology (Global) revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Before you settle on your opinion, we've discovered 2 warning signs for Autozi Internet Technology (Global) (1 can't be ignored!) that you should be aware of.

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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.