Market Participants Recognise Kunshan GuoLi Electronic Technology Co., Ltd.'s (SHSE:688103) Revenues

When you see that almost half of the companies in the Electrical industry in China have price-to-sales ratios (or "P/S") below 2.5x, Kunshan GuoLi Electronic Technology Co., Ltd. (SHSE:688103) looks to be giving off strong sell signals with its 5.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Kunshan GuoLi Electronic Technology

How Kunshan GuoLi Electronic Technology Has Been Performing

Kunshan GuoLi Electronic Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Kunshan GuoLi Electronic Technology's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Kunshan GuoLi Electronic Technology's Revenue Growth Trending?

Kunshan GuoLi Electronic Technology's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a decent 6.8% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 56% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 31% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 25%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Kunshan GuoLi Electronic Technology's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Kunshan GuoLi Electronic Technology's P/S?

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.

We've established that Kunshan GuoLi Electronic Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electrical industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Kunshan GuoLi Electronic Technology you should know about.

If these risks are making you reconsider your opinion on Kunshan GuoLi Electronic 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.