Investors Still Aren't Entirely Convinced By BeijingABT Networks Co.,Ltd.'s (SHSE:688168) Revenues Despite 43% Price Jump

BeijingABT Networks Co.,Ltd. (SHSE:688168) shareholders have had their patience rewarded with a 43% share price jump in the last month. The annual gain comes to 166% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about BeijingABT NetworksLtd's P/S ratio of 8.2x, since the median price-to-sales (or "P/S") ratio for the Software industry in China is also close to 7.5x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for BeijingABT NetworksLtd

What Does BeijingABT NetworksLtd's Recent Performance Look Like?

BeijingABT NetworksLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Keen to find out how analysts think BeijingABT NetworksLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The P/S Ratio?

BeijingABT NetworksLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an excellent 72% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 36% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 28%, which is noticeably less attractive.

With this information, we find it interesting that BeijingABT NetworksLtd is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

BeijingABT NetworksLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 BeijingABT NetworksLtd currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

There are also other vital risk factors to consider and we've discovered 2 warning signs for BeijingABT NetworksLtd (1 is potentially serious!) that you should be aware of before investing here.

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.