The The Honest Company, Inc. (NASDAQ:HNST) share price has done very well over the last month, posting an excellent gain of 28%. The last month tops off a massive increase of 104% in the last year.

Although its price has surged higher, Honest Company may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Personal Products industry in the United States have P/S ratios greater than 1.7x and even P/S higher than 4x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

How Has Honest Company Performed Recently?

Honest Company certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Is There Any Revenue Growth Forecasted For Honest Company?

The only time you'd be truly comfortable seeing a P/S as low as Honest Company's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 9.8%. Revenue has also lifted 15% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 4.6% each year as estimated by the six analysts watching the company. With the industry predicted to deliver 6.5% growth each year, the company is positioned for a comparable revenue result.

With this information, we find it odd that Honest Company is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Honest Company's P/S?

Honest Company's stock price has surged recently, but its but its P/S still remains modest. 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.

We've seen that Honest Company currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Having said that, be aware Honest Company is showing 4 warning signs in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.