Market Participants Recognise Guangzhou Fangbang Electronics Co.,Ltd's (SHSE:688020) Revenues Pushing Shares 30% Higher

Guangzhou Fangbang Electronics Co.,Ltd (SHSE:688020) shares have had a really impressive month, gaining 30% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 32% over that time.

Following the firm bounce in price, given around half the companies in China's Electronic industry have price-to-sales ratios (or "P/S") below 3.6x, you may consider Guangzhou Fangbang ElectronicsLtd as a stock to avoid entirely with its 8.5x 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 so lofty.

Check out our latest analysis for Guangzhou Fangbang ElectronicsLtd

How Has Guangzhou Fangbang ElectronicsLtd Performed Recently?

Guangzhou Fangbang ElectronicsLtd 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. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Guangzhou Fangbang ElectronicsLtd's Revenue Growth Trending?

Guangzhou Fangbang ElectronicsLtd'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 15% last year. The solid recent performance means it was also able to grow revenue by 18% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 55% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Guangzhou Fangbang ElectronicsLtd's P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Guangzhou Fangbang ElectronicsLtd's P/S Mean For Investors?

Shares in Guangzhou Fangbang ElectronicsLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Our look into Guangzhou Fangbang ElectronicsLtd shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 1 warning sign for Guangzhou Fangbang ElectronicsLtd that you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com