Coherent Corp. (NYSE:COHR) Stocks Shoot Up 27% But Its P/S Still Looks Reasonable

Despite an already strong run, Coherent Corp. (NYSE:COHR) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Although its price has surged higher, it's still not a stretch to say that Coherent's price-to-sales (or "P/S") ratio of 2x right now seems quite "middle-of-the-road" compared to the Electronic industry in the United States, where the median P/S ratio is around 1.8x. 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.

Check out our latest analysis for Coherent

What Does Coherent's Recent Performance Look Like?

Recent times have been pleasing for Coherent as its revenue has risen in spite of the industry's average revenue going into reverse. It might be that many expect the strong revenue performance to deteriorate like the rest, which has kept the P/S ratio from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Coherent's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 4.5%. This was backed up an excellent period prior to see revenue up by 60% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 8.2% during the coming year according to the analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 6.8%, which is not materially different.

With this in mind, it makes sense that Coherent's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Its shares have lifted substantially and now Coherent's P/S is back within range of the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at Coherent's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Coherent (1 doesn't sit too well with us!) that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.