Super Group (SGHC) Limited (NYSE:SGHC) shares have had a really impressive month, gaining 28% after a shaky period beforehand. Looking further back, the 24% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Super Group (SGHC)'s P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Hospitality industry in the United States is also close to 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has Super Group (SGHC) Performed Recently?

Recent times haven't been great for Super Group (SGHC) as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Is There Some Revenue Growth Forecasted For Super Group (SGHC)?

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

Retrospectively, the last year delivered a decent 14% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 44% 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.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 5.5% per year over the next three years. With the industry predicted to deliver 12% growth per year, the company is positioned for a weaker revenue result.

With this information, we find it interesting that Super Group (SGHC) is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Super Group (SGHC)'s P/S?

Super Group (SGHC)'s stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

When you consider that Super Group (SGHC)'s revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. When we see companies with a relatively weaker revenue outlook compared to the industry, we suspect the share price is at risk of declining, sending the moderate P/S lower. Circumstances like this present a risk to current and prospective investors who may see share prices fall if the low revenue growth impacts the sentiment.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Super Group (SGHC), and understanding should be part of your investment process.

If these risks are making you reconsider your opinion on Super Group (SGHC), 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.