Subdued Growth No Barrier To RoboTechnik Intelligent Technology Co., LTD (SZSE:300757) With Shares Advancing 27%

RoboTechnik Intelligent Technology Co., LTD (SZSE:300757) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. Looking back a bit further, it's encouraging to see the stock is up 30% in the last year.

Since its price has surged higher, 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 RoboTechnik Intelligent Technology as a stock not worth researching with its 5.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for RoboTechnik Intelligent Technology

How Has RoboTechnik Intelligent Technology Performed Recently?

Recent times have been quite advantageous for RoboTechnik Intelligent Technology as its revenue has been rising very briskly. 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.

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

The only time you'd be truly comfortable seeing a P/S as steep as RoboTechnik Intelligent Technology's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 85% last year. The strong recent performance means it was also able to grow revenue by 112% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 28% shows it's about the same on an annualised basis.

In light of this, it's curious that RoboTechnik Intelligent Technology's P/S sits above the majority of other companies. Apparently many investors in the company are more bullish than recent times would indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as a continuation of recent revenue trends would weigh down the share price eventually.

What We Can Learn From RoboTechnik Intelligent Technology's P/S?

RoboTechnik Intelligent Technology's P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of RoboTechnik Intelligent Technology revealed its three-year revenue trends aren't impacting its high P/S as much as we would have predicted, given they look similar to current industry expectations. When we see average revenue with industry-like growth combined with a high P/S, we suspect the share price is at risk of declining, bringing the P/S back in line with the industry too. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware RoboTechnik Intelligent Technology is showing 3 warning signs in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on RoboTechnik Intelligent 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.