Further Upside For Beijing SuperMap Software Co., Ltd. (SZSE:300036) Shares Could Introduce Price Risks After 33% Bounce

The Beijing SuperMap Software Co., Ltd. (SZSE:300036) share price has done very well over the last month, posting an excellent gain of 33%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 12% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Beijing SuperMap Software's P/S ratio of 4.6x, since the median price-to-sales (or "P/S") ratio for the Software industry in China is also close to 5.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Beijing SuperMap Software

What Does Beijing SuperMap Software's P/S Mean For Shareholders?

Beijing SuperMap Software 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 not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

Is There Some Revenue Growth Forecasted For Beijing SuperMap Software?

Beijing SuperMap Software'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.

Retrospectively, the last year delivered a decent 4.7% gain to the company's revenues. The latest three year period has also seen a 13% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 29% as estimated by the four analysts watching the company. With the industry only predicted to deliver 26%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Beijing SuperMap Software's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Key Takeaway

Its shares have lifted substantially and now Beijing SuperMap Software's P/S is back within range of the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Despite enticing revenue growth figures that outpace the industry, Beijing SuperMap Software's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Beijing SuperMap Software that you should be aware of.

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.