What happened
Shares of Yatsen Holding Limited (YSG 3.42%) soared on Wednesday after the company filed its 2020 financial results with the Securities and Exchange Commission (SEC). Of course, the company had previously announced its results so today's filing shouldn't have contained any new information. But Yatsen stock nevertheless was up 12% as of 2:45 p.m. EDT.
So what
Yatsen is a fast-growing, direct-to-consumer (DTC) cosmetics business in China. Although the company was only founded in 2016, it has quickly grown to over 32 million DTC customers as of the end of 2020. Reflective of this rapid customer growth, its revenue increased 76% year over year in 2020, reaching $802 million. However, it did report a net loss of $412 million on the year, as it spent over $500 million on sales and marketing expenses.
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The financials in today's SEC filing from Yatsen match what it already provided in its press release. So on one hand you wouldn't expect the stock to be up. However, with international stocks, investors sometimes lack confidence in the numbers provided. Previously, Yatsen gave unaudited financial results in its press release. The numbers today are indeed audited, matching the press release, and perhaps making Yatsen's impressive growth numbers appear more credible to investors.
Now what
For 2021, Yatsen is forecasting between 35% and 40% top-line growth. So clearly, growth is slowing. However, this double-digit growth rate is nothing to sneeze at. The stock trades at a trailing price-to-sales ratio of about 12, which is a little high for a consumer-goods stock. However, it certainly has demonstrated past growth worthy of a higher valuation so far.
