Investors Appear Satisfied With Credo Technology Group Holding Ltd's (NASDAQ:CRDO) Prospects As Shares Rocket 27%

Credo Technology Group Holding Ltd (NASDAQ:CRDO) shares have continued their recent momentum with a 27% gain in the last month alone. The last 30 days were the cherry on top of the stock's 372% gain in the last year, which is nothing short of spectacular.

After such a large jump in price, when almost half of the companies in the United States' Semiconductor industry have price-to-sales ratios (or "P/S") below 3.7x, you may consider Credo Technology Group Holding as a stock not worth researching with its 46.1x 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 so lofty.

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See our latest analysis for Credo Technology Group Holding

How Has Credo Technology Group Holding Performed Recently?

Credo Technology Group Holding certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Credo Technology Group Holding's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 125%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 34% per year during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 23% per annum, which is noticeably less attractive.

In light of this, it's understandable that Credo Technology Group Holding'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

Shares in Credo Technology Group Holding have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that Credo Technology Group Holding maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Semiconductor industry, as expected. 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.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Credo Technology Group Holding that you should be aware of.

If you're unsure about the strength of Credo Technology Group Holding'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.