Despite an already strong run, Wingstop Inc. (NASDAQ:WING) shares have been powering on, with a gain of 26% in the last thirty days. The annual gain comes to 104% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, you could be forgiven for thinking Wingstop is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 22.4x, considering almost half the companies in the United States' Hospitality industry have P/S ratios below 1.4x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

How Has Wingstop Performed Recently?

With revenue growth that's inferior to most other companies of late, Wingstop has been relatively sluggish. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very nervous about the viability of the share price.

How Is Wingstop's Revenue Growth Trending?

Wingstop's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 29% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 85% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% per annum during the coming three years according to the analysts following the company. With the industry only predicted to deliver 11% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Wingstop's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Wingstop's P/S Mean For Investors?

Shares in Wingstop have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

We've established that Wingstop maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Hospitality industry, as expected. 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.

Before you take the next step, you should know about the 3 warning signs for Wingstop (2 are significant!) that we have uncovered.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.