Shanghai Aohua Photoelectricity Endoscope Co., Ltd.'s (SHSE:688212) Earnings Haven't Escaped The Attention Of Investors

Shanghai Aohua Photoelectricity Endoscope Co., Ltd.'s (SHSE:688212) price-to-sales (or "P/S") ratio of 9.8x might make it look like a strong sell right now compared to the Medical Equipment industry in China, where around half of the companies have P/S ratios below 6.3x and even P/S below 3x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Shanghai Aohua Photoelectricity Endoscope

What Does Shanghai Aohua Photoelectricity Endoscope's Recent Performance Look Like?

Recent times have been advantageous for Shanghai Aohua Photoelectricity Endoscope as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. 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 Shanghai Aohua Photoelectricity Endoscope's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Shanghai Aohua Photoelectricity Endoscope's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Shanghai Aohua Photoelectricity Endoscope's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 48% last year. The strong recent performance means it was also able to grow revenue by 150% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 45% per year during the coming three years according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 21% per year, which is noticeably less attractive.

In light of this, it's understandable that Shanghai Aohua Photoelectricity Endoscope'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.

What We Can Learn From Shanghai Aohua Photoelectricity Endoscope's P/S?

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.

As we suspected, our examination of Shanghai Aohua Photoelectricity Endoscope'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. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Shanghai Aohua Photoelectricity Endoscope.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.