VNET Group, Inc. (NASDAQ:VNET) Stock Rockets 32% But Many Are Still Ignoring The Company

Despite an already strong run, VNET Group, Inc. (NASDAQ:VNET) shares have been powering on, with a gain of 32% in the last thirty days. The last 30 days were the cherry on top of the stock's 577% gain in the last year, which is nothing short of spectacular.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about VNET Group's P/S ratio of 2.9x, since the median price-to-sales (or "P/S") ratio for the IT industry in the United States is also close to 3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for VNET Group

What Does VNET Group's P/S Mean For Shareholders?

VNET Group could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered a decent 7.0% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 37% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the twelve analysts covering the company suggest revenue should grow by 14% per year over the next three years. With the industry only predicted to deliver 11% per annum, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that VNET Group's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does VNET Group's P/S Mean For Investors?

Its shares have lifted substantially and now VNET Group's P/S is back within range of the industry median. 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, VNET Group's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for VNET Group that you need to be mindful of.

If you're unsure about the strength of VNET Group'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.