After Leaping 32% Shanghai W-Ibeda High Tech.Group Co.,Ltd. (SHSE:688071) Shares Are Not Flying Under The Radar

Shanghai W-Ibeda High Tech.Group Co.,Ltd. (SHSE:688071) shares have continued their recent momentum with a 32% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 37% in the last twelve months.

Since its price has surged higher, Shanghai W-Ibeda High Tech.GroupLtd may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 5.7x, since almost half of all companies in the Electronic in China have P/S ratios under 4.5x and even P/S lower than 2x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

View our latest analysis for Shanghai W-Ibeda High Tech.GroupLtd

What Does Shanghai W-Ibeda High Tech.GroupLtd's P/S Mean For Shareholders?

Shanghai W-Ibeda High Tech.GroupLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shanghai W-Ibeda High Tech.GroupLtd.

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

Shanghai W-Ibeda High Tech.GroupLtd's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 17% gain to the company's top line. The latest three year period has also seen an excellent 32% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 130% during the coming year according to the two analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 27%, which is noticeably less attractive.

With this information, we can see why Shanghai W-Ibeda High Tech.GroupLtd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The large bounce in Shanghai W-Ibeda High Tech.GroupLtd's shares has lifted the company's P/S handsomely. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Shanghai W-Ibeda High Tech.GroupLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. 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.

It is also worth noting that we have found 2 warning signs for Shanghai W-Ibeda High Tech.GroupLtd that you need to take into consideration.

If these risks are making you reconsider your opinion on Shanghai W-Ibeda High Tech.GroupLtd, 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.