Beijing Balance Medical Technology Co.,Ltd. (SHSE:688198) Not Flying Under The Radar

You may think that with a price-to-sales (or "P/S") ratio of 35.9x Beijing Balance Medical Technology Co.,Ltd. (SHSE:688198) is a stock to avoid completely, seeing as almost half of all the Medical Equipment companies in China have P/S ratios under 5.5x and even P/S lower than 2x aren't out of the ordinary. 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 Beijing Balance Medical TechnologyLtd

How Has Beijing Balance Medical TechnologyLtd Performed Recently?

With revenue growth that's superior to most other companies of late, Beijing Balance Medical TechnologyLtd has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Keen to find out how analysts think Beijing Balance Medical TechnologyLtd'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 Beijing Balance Medical TechnologyLtd?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Beijing Balance Medical TechnologyLtd's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 30% last year. The latest three year period has also seen an excellent 81% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 46% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 27%, which is noticeably less attractive.

In light of this, it's understandable that Beijing Balance Medical TechnologyLtd's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Beijing Balance Medical TechnologyLtd's P/S

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look into Beijing Balance Medical TechnologyLtd 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. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Beijing Balance Medical TechnologyLtd you should know about.

If these risks are making you reconsider your opinion on Beijing Balance Medical TechnologyLtd, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com