After Leaping 30% Dalian Sunasia Tourism Holding CO.,LTD (SHSE:600593) Shares Are Not Flying Under The Radar

Dalian Sunasia Tourism Holding CO.,LTD (SHSE:600593) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 54% in the last year.

After such a large jump in price, Dalian Sunasia Tourism HoldingLTD may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 7.1x, since almost half of all companies in the Hospitality in China have P/S ratios under 5.4x and even P/S lower than 2x are not unusual. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Dalian Sunasia Tourism HoldingLTD

What Does Dalian Sunasia Tourism HoldingLTD's P/S Mean For Shareholders?

Dalian Sunasia Tourism HoldingLTD certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It seems that many are expecting the strong revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Dalian Sunasia Tourism HoldingLTD will help you shine a light on its historical performance.

Do Revenue Forecasts Match The High P/S Ratio?

Dalian Sunasia Tourism HoldingLTD's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 166% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 39%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's understandable that Dalian Sunasia Tourism HoldingLTD's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Dalian Sunasia Tourism HoldingLTD's P/S

Dalian Sunasia Tourism HoldingLTD's P/S is on the rise since its shares have risen strongly. 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.

We've established that Dalian Sunasia Tourism HoldingLTD maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. If recent medium-term revenue trends continue, 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 2 warning signs for Dalian Sunasia Tourism HoldingLTD (1 can't be ignored) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.