Market Participants Recognise Zepp Health Corporation's (NYSE:ZEPP) Revenues Pushing Shares 28% Higher

Despite an already strong run, Zepp Health Corporation (NYSE:ZEPP) shares have been powering on, with a gain of 28% in the last thirty days. This latest share price bounce rounds out a remarkable 1,529% gain over the last twelve months.

Since its price has surged higher, when almost half of the companies in the United States' Electronic industry have price-to-sales ratios (or "P/S") below 2.5x, you may consider Zepp Health as a stock probably not worth researching with its 3.7x 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 as high as it is.

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View our latest analysis for Zepp Health

How Zepp Health Has Been Performing

Zepp Health could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Zepp Health will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Zepp Health's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a frustrating 16% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 74% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 27% as estimated by the one analyst watching the company. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.

With this information, we can see why Zepp Health is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Zepp Health's P/S Mean For Investors?

The large bounce in Zepp Health's shares has lifted the company's P/S handsomely. 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 into Zepp Health shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Zepp Health you should know about.

If these risks are making you reconsider your opinion on Zepp Health, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.