Zhejiang Meorient Commerce Exhibition Inc.'s (SZSE:300795) 37% Jump Shows Its Popularity With Investors

Zhejiang Meorient Commerce Exhibition Inc. (SZSE:300795) shares have had a really impressive month, gaining 37% after a shaky period beforehand. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Following the firm bounce in price, you could be forgiven for thinking Zhejiang Meorient Commerce Exhibition is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 9.6x, considering almost half the companies in China's Media industry have P/S ratios below 2.7x. 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 Zhejiang Meorient Commerce Exhibition

What Does Zhejiang Meorient Commerce Exhibition's Recent Performance Look Like?

Zhejiang Meorient Commerce Exhibition certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Zhejiang Meorient Commerce Exhibition.

How Is Zhejiang Meorient Commerce Exhibition's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Zhejiang Meorient Commerce Exhibition's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 201% last year. The strong recent performance means it was also able to grow revenue by 196% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 46% as estimated by the three analysts watching the company. With the industry only predicted to deliver 20%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Zhejiang Meorient Commerce Exhibition's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Zhejiang Meorient Commerce Exhibition's P/S Mean For Investors?

The strong share price surge has lead to Zhejiang Meorient Commerce Exhibition's P/S soaring as well. 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.

We've established that Zhejiang Meorient Commerce Exhibition maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Media industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Zhejiang Meorient Commerce Exhibition with six simple checks.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.