The Market Lifts ATRenew Inc. (NYSE:RERE) Shares 31% But It Can Do More

ATRenew Inc. (NYSE:RERE) shares have had a really impressive month, gaining 31% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 20% is also fairly reasonable.

Although its price has surged higher, there still wouldn't be many who think ATRenew's price-to-sales (or "P/S") ratio of 0.3x is worth a mention when the median P/S in the United States' Specialty Retail industry is similar at about 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for ATRenew

How Has ATRenew Performed Recently?

Recent times have been advantageous for ATRenew as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is ATRenew's Revenue Growth Trending?

In order to justify its P/S ratio, ATRenew would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. Pleasingly, revenue has also lifted 142% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 25% over the next year. With the industry only predicted to deliver 3.6%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that ATRenew's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

ATRenew's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Despite enticing revenue growth figures that outpace the industry, ATRenew's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with ATRenew.

If you're unsure about the strength of ATRenew'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.