Market Participants Recognise Beijing Vastdata Technology Co., Ltd.'s (SHSE:603138) Revenues Pushing Shares 27% Higher

Those holding Beijing Vastdata Technology Co., Ltd. (SHSE:603138) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last 30 days bring the annual gain to a very sharp 63%.

Following the firm bounce in price, Beijing Vastdata Technology's price-to-sales (or "P/S") ratio of 13.5x might make it look like a strong sell right now compared to other companies in the IT industry in China, where around half of the companies have P/S ratios below 5.1x and even P/S below 2x 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.

See our latest analysis for Beijing Vastdata Technology

What Does Beijing Vastdata Technology's P/S Mean For Shareholders?

Recent times have been advantageous for Beijing Vastdata Technology as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beijing Vastdata Technology.

Do Revenue Forecasts Match The High P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 37% gain to the company's top line. Still, revenue has fallen 8.2% in total from three years ago, which is quite disappointing. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 65% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 17%, which is noticeably less attractive.

In light of this, it's understandable that Beijing Vastdata Technology'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 Does Beijing Vastdata Technology's P/S Mean For Investors?

Beijing Vastdata Technology's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of Beijing Vastdata Technology's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

Plus, you should also learn about this 1 warning sign we've spotted with Beijing Vastdata Technology.

If these risks are making you reconsider your opinion on Beijing Vastdata Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

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.