RoboTechnik Intelligent Technology Co., LTD's (SZSE:300757) 26% Cheaper Price Remains In Tune With Revenues

The RoboTechnik Intelligent Technology Co., LTD (SZSE:300757) share price has softened a substantial 26% over the previous 30 days, handing back much of the gains the stock has made lately. Still, a bad month hasn't completely ruined the past year with the stock gaining 77%, which is great even in a bull market.

In spite of the heavy fall in price, when almost half of the companies in China's Machinery industry have price-to-sales ratios (or "P/S") below 2.6x, you may still consider RoboTechnik Intelligent Technology as a stock not worth researching with its 8x 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 RoboTechnik Intelligent Technology

How RoboTechnik Intelligent Technology Has Been Performing

With revenue growth that's exceedingly strong of late, RoboTechnik Intelligent Technology has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. 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 RoboTechnik Intelligent Technology will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For RoboTechnik Intelligent Technology?

RoboTechnik Intelligent 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.

Taking a look back first, we see that the company grew revenue by an impressive 85% last year. Pleasingly, revenue has also lifted 112% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 24% shows it's noticeably more attractive.

With this information, we can see why RoboTechnik Intelligent Technology is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What Does RoboTechnik Intelligent Technology's P/S Mean For Investors?

A significant share price dive has done very little to deflate RoboTechnik Intelligent Technology's very lofty 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.

As we suspected, our examination of RoboTechnik Intelligent Technology 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.

You should always think about risks. Case in point, we've spotted 3 warning signs for RoboTechnik Intelligent Technology you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.