Revenues Tell The Story For Kairuide Holding Co.,Ltd. (SZSE:002072) As Its Stock Soars 42%

Despite an already strong run, Kairuide Holding Co.,Ltd. (SZSE:002072) shares have been powering on, with a gain of 42% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.8% in the last twelve months.

After such a large jump in price, you could be forgiven for thinking Kairuide HoldingLtd is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 4x, considering almost half the companies in China's Trade Distributors industry have P/S ratios below 0.8x. 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 Kairuide HoldingLtd

What Does Kairuide HoldingLtd's P/S Mean For Shareholders?

Kairuide HoldingLtd certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Kairuide HoldingLtd will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Kairuide HoldingLtd?

Kairuide HoldingLtd'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 an exceptional 64% gain to the company's top line. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is only predicted to deliver 13% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in consideration, it's not hard to understand why Kairuide HoldingLtd's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does Kairuide HoldingLtd's P/S Mean For Investors?

Shares in Kairuide HoldingLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Kairuide HoldingLtd revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Kairuide HoldingLtd is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Kairuide HoldingLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.