Prenetics Global Limited (NASDAQ:PRE) shareholders have had their patience rewarded with a 28% share price jump in the last month. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Since its price has surged higher, given close to half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") below 1x, you may consider Prenetics Global as a stock to potentially avoid with its 2.7x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

What Does Prenetics Global's P/S Mean For Shareholders?

Prenetics Global 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

How Is Prenetics Global's Revenue Growth Trending?

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

Retrospectively, the last year delivered a frustrating 91% decrease to the company's top line. As a result, revenue from three years ago have also fallen 89% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 234% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 8.5% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Prenetics Global's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Final Word

Prenetics Global's P/S is on the rise since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into Prenetics Global shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Prenetics Global that you should be aware of.

If these risks are making you reconsider your opinion on Prenetics Global, 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.