Investors Appear Satisfied With SurgePays, Inc.'s (NASDAQ:SURG) Prospects As Shares Rocket 25%

SurgePays, Inc. (NASDAQ:SURG) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the last month did very little to improve the 72% share price decline over the last year.

In spite of the firm bounce in price, it's still not a stretch to say that SurgePays' price-to-sales (or "P/S") ratio of 0.5x right now seems quite "middle-of-the-road" compared to the Wireless Telecom industry in the United States, where the median P/S ratio is around 0.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for SurgePays

What Does SurgePays' P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, SurgePays' revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

What Are Revenue Growth Metrics Telling Us About The P/S?

SurgePays' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 41%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 73% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 3.1% as estimated by the four analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 4.6%, which is not materially different.

In light of this, it's understandable that SurgePays' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

SurgePays appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Our look at SurgePays' 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.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for SurgePays that you should be aware of.

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