Investors Still Aren't Entirely Convinced By Shanghai SK Automation Technology Co., Ltd.'s (SHSE:688155) Revenues Despite 26% Price Jump

Shanghai SK Automation Technology Co., Ltd. (SHSE:688155) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 29%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Shanghai SK Automation Technology's P/S ratio of 2.1x, since the median price-to-sales (or "P/S") ratio for the Auto Components industry in China is also close to 2.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Shanghai SK Automation Technology

How Has Shanghai SK Automation Technology Performed Recently?

With revenue growth that's superior to most other companies of late, Shanghai SK Automation Technology has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on Shanghai SK Automation Technology will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The P/S?

Shanghai SK Automation Technology's 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.

If we review the last year of revenue growth, the company posted a terrific increase of 36%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 30% over the next year. That's shaping up to be materially higher than the 25% growth forecast for the broader industry.

In light of this, it's curious that Shanghai SK Automation Technology's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Shanghai SK Automation Technology's P/S

Its shares have lifted substantially and now Shanghai SK Automation Technology's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Shanghai SK Automation Technology's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Plus, you should also learn about this 1 warning sign we've spotted with Shanghai SK Automation Technology.

If these risks are making you reconsider your opinion on Shanghai SK Automation Technology, 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.