Market Participants Recognise Geovis Technology Co.,Ltd's (SHSE:688568) Revenues Pushing Shares 31% Higher

Those holding Geovis Technology Co.,Ltd (SHSE:688568) shares would be relieved that the share price has rebounded 31% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last month tops off a massive increase of 112% in the last year.

Since its price has surged higher, you could be forgiven for thinking Geovis TechnologyLtd is a stock not worth researching with a price-to-sales ratios (or "P/S") of 10.6x, considering almost half the companies in China's Software industry have P/S ratios below 7.3x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Geovis TechnologyLtd

How Has Geovis TechnologyLtd Performed Recently?

Geovis TechnologyLtd 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Geovis TechnologyLtd would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 45% last year. Pleasingly, revenue has also lifted 222% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 35% each year over the next three years. With the industry only predicted to deliver 24% each year, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Geovis TechnologyLtd'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 We Can Learn From Geovis TechnologyLtd's P/S?

Geovis TechnologyLtd shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

As we suspected, our examination of Geovis TechnologyLtd's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 2 warning signs for Geovis TechnologyLtd (1 doesn't sit too well with us!) that we have uncovered.

If you're unsure about the strength of Geovis TechnologyLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.