Investors Appear Satisfied With China Reform Health Management and Services Group Co., Ltd.'s (SZSE:000503) Prospects

When you see that almost half of the companies in the Healthcare industry in China have price-to-sales ratios (or "P/S") below 2x, China Reform Health Management and Services Group Co., Ltd. (SZSE:000503) looks to be giving off strong sell signals with its 29.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for China Reform Health Management and Services Group

How China Reform Health Management and Services Group Has Been Performing

The revenue growth achieved at China Reform Health Management and Services Group over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. 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 China Reform Health Management and Services Group's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For China Reform Health Management and Services Group?

China Reform Health Management and Services Group's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. The latest three year period has also seen an excellent 133% 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 19% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why China Reform Health Management and Services Group'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.

What Does China Reform Health Management and Services Group's P/S Mean For Investors?

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 China Reform Health Management and Services Group maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

It is also worth noting that we have found 1 warning sign for China Reform Health Management and Services Group that you need to take into consideration.

If you're unsure about the strength of China Reform Health Management and Services Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.