Revenues Tell The Story For Chongqing Mas Sci.&Tech.Co.,Ltd. (SZSE:300275) As Its Stock Soars 39%

Despite an already strong run, Chongqing Mas Sci.&Tech.Co.,Ltd. (SZSE:300275) shares have been powering on, with a gain of 39% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 20% is also fairly reasonable.

Following the firm bounce in price, when almost half of the companies in China's Machinery industry have price-to-sales ratios (or "P/S") below 2.8x, you may consider Chongqing Mas Sci.&Tech.Co.Ltd as a stock not worth researching with its 9.6x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Chongqing Mas Sci.&Tech.Co.Ltd

How Chongqing Mas Sci.&Tech.Co.Ltd Has Been Performing

There hasn't been much to differentiate Chongqing Mas Sci.&Tech.Co.Ltd's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Chongqing Mas Sci.&Tech.Co.Ltd.

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Chongqing Mas Sci.&Tech.Co.Ltd would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a decent 8.1% gain to the company's revenues. The latest three year period has also seen an excellent 58% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 35% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 23%, which is noticeably less attractive.

In light of this, it's understandable that Chongqing Mas Sci.&Tech.Co.Ltd's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Chongqing Mas Sci.&Tech.Co.Ltd's P/S Mean For Investors?

Shares in Chongqing Mas Sci.&Tech.Co.Ltd 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.

We've established that Chongqing Mas Sci.&Tech.Co.Ltd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Machinery industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Chongqing Mas Sci.&Tech.Co.Ltd that you should be aware of.

If you're unsure about the strength of Chongqing Mas Sci.&Tech.Co.Ltd'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.