Shanghai W-Ibeda High Tech.Group Co.,Ltd.'s (SHSE:688071) 29% Jump Shows Its Popularity With Investors

Shanghai W-Ibeda High Tech.Group Co.,Ltd. (SHSE:688071) shares have continued their recent momentum with a 29% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 46%.

Since its price has surged higher, Shanghai W-Ibeda High Tech.GroupLtd may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 8.4x, since almost half of all companies in the Electronic industry in China have P/S ratios under 4.4x 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 highly elevated P/S.

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

How Shanghai W-Ibeda High Tech.GroupLtd Has Been Performing

Recent times have been advantageous for Shanghai W-Ibeda High Tech.GroupLtd as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. 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 Shanghai W-Ibeda High Tech.GroupLtd will help you uncover what's on the horizon.

How Is Shanghai W-Ibeda High Tech.GroupLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Shanghai W-Ibeda High Tech.GroupLtd would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 17%. The strong recent performance means it was also able to grow revenue by 32% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 48% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 25%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Shanghai W-Ibeda High Tech.GroupLtd'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.

The Final Word

The strong share price surge has lead to Shanghai W-Ibeda High Tech.GroupLtd's P/S soaring as well. 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.

Our look into Shanghai W-Ibeda High Tech.GroupLtd 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 these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Shanghai W-Ibeda High Tech.GroupLtd that you need to be mindful 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.