SurgePays, Inc. (NASDAQ:SURG) shares have had a horrible month, losing 44% after a relatively good period beforehand. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 25%.

Although its price has dipped substantially, there still wouldn't be many who think SurgePays' price-to-sales (or "P/S") ratio of 0.7x is worth a mention when it essentially matches the median P/S in the United States' Wireless Telecom industry. 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.

How SurgePays Has Been Performing

SurgePays certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

How Is SurgePays' Revenue Growth Trending?

SurgePays' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. The latest three year period has also seen an excellent 152% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 5.7% as estimated by the lone analyst watching the company. With the industry predicted to deliver 2.9% growth, that's a disappointing outcome.

With this information, we find it concerning that SurgePays is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

The Final Word

With its share price dropping off a cliff, the P/S for SurgePays looks to be in line with the rest of the Wireless Telecom 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 SurgePays' 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.

Before you settle on your opinion, we've discovered 3 warning signs for SurgePays (1 is significant!) that you should be aware of.

If you're unsure about the strength of SurgePays' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.