EVgo, Inc. (NASDAQ:EVGO) Stocks Shoot Up 30% But Its P/S Still Looks Reasonable

EVgo, Inc. (NASDAQ:EVGO) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 39% over that time.

Since its price has surged higher, you could be forgiven for thinking EVgo is a stock not worth researching with a price-to-sales ratios (or "P/S") of 1.4x, considering almost half the companies in the United States' Specialty Retail industry have P/S ratios below 0.4x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for EVgo

What Does EVgo's Recent Performance Look Like?

EVgo 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For EVgo?

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

Taking a look back first, we see that the company grew revenue by an impressive 164% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. 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 37% per year as estimated by the twelve analysts watching the company. With the industry only predicted to deliver 5.7% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that EVgo's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

The large bounce in EVgo's shares has lifted the company's P/S handsomely. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of EVgo's 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.

Before you settle on your opinion, we've discovered 2 warning signs for EVgo that you should be aware of.

If you're unsure about the strength of EVgo's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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