Despite an already strong run, Superior Group of Companies, Inc. (NASDAQ:SGC) shares have been powering on, with a gain of 26% in the last thirty days. The last month tops off a massive increase of 126% in the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Superior Group of Companies' P/S ratio of 0.6x, since the median price-to-sales (or "P/S") ratio for the Luxury industry in the United States is also close to 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Superior Group of Companies Has Been Performing

Superior Group of Companies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor 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.

How Is Superior Group of Companies' Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Superior Group of Companies' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 2.6% decrease to the company's top line. As a result, revenue from three years ago have also fallen 3.8% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 4.4% over the next year. Meanwhile, the rest of the industry is forecast to expand by 5.3%, which is not materially different.

In light of this, it's understandable that Superior Group of Companies' P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Superior Group of Companies' P/S?

Superior Group of Companies appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A Superior Group of Companies' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Luxury industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Superior Group of Companies you should be aware of.

If these risks are making you reconsider your opinion on Superior Group of Companies, 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.