Revenues Tell The Story For Anhui Golden Seed Winery Co., Ltd. (SHSE:600199) As Its Stock Soars 31%

Anhui Golden Seed Winery Co., Ltd. (SHSE:600199) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 43% in the last twelve months.

Following the firm bounce in price, you could be forgiven for thinking Anhui Golden Seed Winery is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6.4x, considering almost half the companies in China's Beverage industry have P/S ratios below 4.1x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Anhui Golden Seed Winery

What Does Anhui Golden Seed Winery's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Anhui Golden Seed Winery has been relatively sluggish. One possibility is that the P/S ratio is high because investors think this lacklustre revenue performance will improve markedly. 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 Anhui Golden Seed Winery's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Anhui Golden Seed Winery's Revenue Growth Trending?

In order to justify its P/S ratio, Anhui Golden Seed Winery would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Regardless, revenue has managed to lift by a handy 17% in aggregate from three years ago, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 38% over the next year. With the industry only predicted to deliver 14%, the company is positioned for a stronger revenue result.

With this information, we can see why Anhui Golden Seed Winery 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 Anhui Golden Seed Winery's P/S Mean For Investors?

Shares in Anhui Golden Seed Winery have seen a strong upwards swing lately, which has really helped boost its P/S figure. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Anhui Golden Seed Winery shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Anhui Golden Seed Winery that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.