FingerMotion, Inc.’s (NASDAQ:FNGR) 42% Jump Shows Its Popularity With Investors

FingerMotion, Inc. (NASDAQ:FNGR) shareholders have had their patience rewarded with a 42% share price jump in the last month. Looking back a bit further, it’s encouraging to see the stock is up 88% in the last year.

Since its price has surged higher, you could be forgiven for thinking FingerMotion is a stock to steer clear of with a price-to-sales ratios (or “P/S”) of 4.1x, considering almost half the companies in the United States’ Wireless Telecom industry have P/S ratios below 0.6x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it’s justified.

Check out our latest analysis for FingerMotion

What Does FingerMotion’s P/S Mean For Shareholders?

With revenue growth that’s exceedingly strong of late, FingerMotion has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. However, if this isn’t the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on FingerMotion will help you shine a light on its historical performance.

How Is FingerMotion’s Revenue Growth Trending?

In order to justify its P/S ratio, FingerMotion would need to produce outstanding growth that’s well in excess of the industry.

Retrospectively, the last year delivered an exceptional 50% gain to the company’s top line. Pleasingly, revenue has also lifted 175% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

When compared to the industry’s one-year growth forecast of 2.4%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it’s not hard to understand why FingerMotion’s P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does FingerMotion’s P/S Mean For Investors?

The strong share price surge has lead to FingerMotion’s P/S soaring as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn’t sensible, however it can be a practical guide to the company’s future prospects.

We’ve established that FingerMotion maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example – FingerMotion has 4 warning signs (and 2 which are significant) we think you should know about.

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.

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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.