Revenues Tell The Story For Shenzhen Urban Transport Planning Center Co., Ltd. (SZSE:301091)

Shenzhen Urban Transport Planning Center Co., Ltd.'s (SZSE:301091) price-to-sales (or "P/S") ratio of 15.2x might make it look like a strong sell right now compared to the Professional Services industry in China, where around half of the companies have P/S ratios below 3.8x and even P/S below 1.5x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for Shenzhen Urban Transport Planning Center

How Has Shenzhen Urban Transport Planning Center Performed Recently?

Shenzhen Urban Transport Planning Center hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Keen to find out how analysts think Shenzhen Urban Transport Planning Center's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Shenzhen Urban Transport Planning Center?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Shenzhen Urban Transport Planning Center's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.5%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 9.1% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 37% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 25%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Shenzhen Urban Transport Planning Center's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Shenzhen Urban Transport Planning Center's 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 Shenzhen Urban Transport Planning Center's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Shenzhen Urban Transport Planning Center that you should be aware of.

If you're unsure about the strength of Shenzhen Urban Transport Planning Center'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.