Market Participants Recognise Shanghai Emperor of Cleaning Hi-Tech Co., Ltd's (SHSE:603200) Revenues Pushing Shares 31% Higher

Shanghai Emperor of Cleaning Hi-Tech Co., Ltd (SHSE:603200) shareholders are no doubt pleased to see that the share price has bounced 31% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 25% over that time.

Following the firm bounce in price, when almost half of the companies in China's Commercial Services industry have price-to-sales ratios (or "P/S") below 2.5x, you may consider Shanghai Emperor of Cleaning Hi-Tech as a stock not worth researching with its 6.3x 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.

View our latest analysis for Shanghai Emperor of Cleaning Hi-Tech

What Does Shanghai Emperor of Cleaning Hi-Tech's Recent Performance Look Like?

Shanghai Emperor of Cleaning Hi-Tech could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Shanghai Emperor of Cleaning Hi-Tech's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Shanghai Emperor of Cleaning Hi-Tech's Revenue Growth Trending?

In order to justify its P/S ratio, Shanghai Emperor of Cleaning Hi-Tech would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a frustrating 20% decrease to the company's top line. As a result, revenue from three years ago have also fallen 16% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 42% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 30%, which is noticeably less attractive.

With this information, we can see why Shanghai Emperor of Cleaning Hi-Tech is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Shanghai Emperor of Cleaning Hi-Tech's P/S Mean For Investors?

The strong share price surge has lead to Shanghai Emperor of Cleaning Hi-Tech's P/S soaring as well. 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 Shanghai Emperor of Cleaning Hi-Tech maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Commercial Services industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. 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 1 warning sign for Shanghai Emperor of Cleaning Hi-Tech you should know about.

If these risks are making you reconsider your opinion on Shanghai Emperor of Cleaning Hi-Tech, 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.