Despite an already strong run, United States Cellular Corporation (NYSE:USM) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 217% in the last year.

Although its price has surged higher, there still wouldn't be many who think United States Cellular's price-to-sales (or "P/S") ratio of 1.2x is worth a mention when the median P/S in the United States' Wireless Telecom industry is similar at about 1x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

What Does United States Cellular's Recent Performance Look Like?

United States Cellular has been struggling lately as its revenue has declined faster than most other companies. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

How Is United States Cellular's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like United States Cellular's is when the company's growth is tracking the industry closely.

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 6.6%. As a result, revenue from three years ago have also fallen 5.5% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the five analysts covering the company suggest revenue growth is heading into negative territory, declining 2.5% over the next year. Meanwhile, the broader industry is forecast to expand by 2.9%, which paints a poor picture.

With this information, we find it concerning that United States Cellular is trading at a fairly similar P/S compared to the industry. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. There's a good chance these shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the negative growth outlook.

What We Can Learn From United States Cellular's P/S?

United States Cellular appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in 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.

While United States Cellular's P/S isn't anything out of the ordinary for companies in the industry, we didn't expect it given forecasts of revenue decline. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the poor revenue outlook tells us one thing, it's that these current price levels could be unsustainable.

And what about other risks? Every company has them, and we've spotted 2 warning signs for United States Cellular (of which 1 makes us a bit uncomfortable!) you should know about.

If these risks are making you reconsider your opinion on United States Cellular, 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.

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