Market Participants Recognise Sanwei Holding Group Co.,Ltd's (SHSE:603033) Revenues Pushing Shares 30% Higher

Those holding Sanwei Holding Group Co.,Ltd (SHSE:603033) shares would be relieved that the share price has rebounded 30% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Following the firm bounce in price, you could be forgiven for thinking Sanwei Holding GroupLtd is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.7x, considering almost half the companies in China's Chemicals industry have P/S ratios below 1.7x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Sanwei Holding GroupLtd

How Sanwei Holding GroupLtd Has Been Performing

Recent times have been advantageous for Sanwei Holding GroupLtd as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Sanwei Holding GroupLtd will help you uncover what's on the horizon.

What Are Revenue Growth Metrics Telling Us About The High P/S?

Sanwei Holding GroupLtd's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. The latest three year period has also seen an excellent 77% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 38% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 22%, which is noticeably less attractive.

In light of this, it's understandable that Sanwei Holding GroupLtd'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 Final Word

Sanwei Holding GroupLtd shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Sanwei Holding GroupLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Chemicals industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Sanwei Holding GroupLtd (of which 1 is concerning!) you should know about.

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).

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

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.