Beijing Deep Glint Technology Co., Ltd.'s (SHSE:688207) Popularity With Investors Is Clear

When you see that almost half of the companies in the Software industry in China have price-to-sales ratios (or "P/S") below 5x, Beijing Deep Glint Technology Co., Ltd. (SHSE:688207) looks to be giving off strong sell signals with its 10.3x 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.

See our latest analysis for Beijing Deep Glint Technology

How Beijing Deep Glint Technology Has Been Performing

Beijing Deep Glint Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

Is There Enough Revenue Growth Forecasted For Beijing Deep Glint Technology?

Beijing Deep Glint Technology'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.

Retrospectively, the last year delivered a decent 9.2% gain to the company's revenues. The latest three year period has also seen an excellent 58% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 43% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 34%, which is noticeably less attractive.

In light of this, it's understandable that Beijing Deep Glint Technology's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Beijing Deep Glint Technology's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Beijing Deep Glint Technology shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Beijing Deep Glint Technology (1 is a bit unpleasant!) that you need to be mindful of.

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

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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.