Why Investors Shouldn't Be Surprised By Beijing Integrity Technology Co.,Ltd's (SHSE:688244) P/S

When you see that almost half of the companies in the Software industry in China have price-to-sales ratios (or "P/S") below 5.4x, Beijing Integrity Technology Co.,Ltd (SHSE:688244) looks to be giving off some sell signals with its 7.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Beijing Integrity TechnologyLtd

What Does Beijing Integrity TechnologyLtd's P/S Mean For Shareholders?

Recent times have been advantageous for Beijing Integrity TechnologyLtd 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Beijing Integrity TechnologyLtd will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Beijing Integrity TechnologyLtd's is when the company's growth is on track to outshine 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 36% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 61% as estimated by the two analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 33%, which is noticeably less attractive.

In light of this, it's understandable that Beijing Integrity TechnologyLtd'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 Integrity TechnologyLtd's P/S Mean For Investors?

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Beijing Integrity TechnologyLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Beijing Integrity TechnologyLtd (1 can't be ignored) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.