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    Four Seasons Education (Cayman) Inc. (NYSE:FEDU) Surges 28% Yet Its Low P/S Is No Reason For Excitement

    Simply Wall St·08/03/2025 12:08:45
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    Four Seasons Education (Cayman) Inc. (NYSE:FEDU) shares have continued their recent momentum with a 28% gain in the last month alone. Unfortunately, despite the strong performance over the last month, the full year gain of 7.6% isn't as attractive.

    Although its price has surged higher, considering around half the companies operating in the United States' Consumer Services industry have price-to-sales ratios (or "P/S") above 1.5x, you may still consider Four Seasons Education (Cayman) as an solid investment opportunity with its 0.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

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    See our latest analysis for Four Seasons Education (Cayman)

    ps-multiple-vs-industry
    NYSE:FEDU Price to Sales Ratio vs Industry August 3rd 2025

    How Has Four Seasons Education (Cayman) Performed Recently?

    Four Seasons Education (Cayman) certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Four Seasons Education (Cayman) will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

    We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Four Seasons Education (Cayman)'s earnings, revenue and cash flow.

    Do Revenue Forecasts Match The Low P/S Ratio?

    Four Seasons Education (Cayman)'s P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

    Taking a look back first, we see that the company grew revenue by an impressive 101% last year. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

    This is in contrast to the rest of the industry, which is expected to grow by 12% over the next year, materially higher than the company's recent medium-term annualised growth rates.

    In light of this, it's understandable that Four Seasons Education (Cayman)'s P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

    The Key Takeaway

    Four Seasons Education (Cayman)'s stock price has surged recently, but its but its P/S still remains modest. 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.

    As we suspected, our examination of Four Seasons Education (Cayman) revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

    We don't want to rain on the parade too much, but we did also find 4 warning signs for Four Seasons Education (Cayman) that you need to be mindful of.

    Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.