Market Participants Recognise Gansu Huangtai Wine-Marketing Industry Co.,Ltd's (SZSE:000995) Revenues Pushing Shares 68% Higher

The Gansu Huangtai Wine-Marketing Industry Co.,Ltd (SZSE:000995) share price has done very well over the last month, posting an excellent gain of 68%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 11% over that time.

Following the firm bounce in price, you could be forgiven for thinking Gansu Huangtai Wine-Marketing IndustryLtd is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 17.8x, considering almost half the companies in China's Beverage industry have P/S ratios below 4.3x. 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 Gansu Huangtai Wine-Marketing IndustryLtd

What Does Gansu Huangtai Wine-Marketing IndustryLtd's Recent Performance Look Like?

The recent revenue growth at Gansu Huangtai Wine-Marketing IndustryLtd would have to be considered satisfactory if not spectacular. One possibility is that the P/S ratio is high because investors think this good revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Gansu Huangtai Wine-Marketing IndustryLtd's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For Gansu Huangtai Wine-Marketing IndustryLtd?

The only time you'd be truly comfortable seeing a P/S as steep as Gansu Huangtai Wine-Marketing IndustryLtd's is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a worthy increase of 3.4%. Pleasingly, revenue has also lifted 66% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 14% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Gansu Huangtai Wine-Marketing IndustryLtd's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On Gansu Huangtai Wine-Marketing IndustryLtd's P/S

The strong share price surge has lead to Gansu Huangtai Wine-Marketing IndustryLtd's P/S soaring as well. 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.

It's no surprise that Gansu Huangtai Wine-Marketing IndustryLtd can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Gansu Huangtai Wine-Marketing IndustryLtd that 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.