Revenues Tell The Story For Orbbec Inc. (SHSE:688322) As Its Stock Soars 26%

Orbbec Inc. (SHSE:688322) shares have continued their recent momentum with a 26% gain in the last month alone. The annual gain comes to 100% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, Orbbec's price-to-sales (or "P/S") ratio of 46.7x might make it look like a strong sell right now compared to other companies in the Electronic industry in China, where around half of the companies have P/S ratios below 4.5x and even P/S below 2x are quite common. 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 Orbbec

What Does Orbbec's P/S Mean For Shareholders?

Orbbec 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.

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

How Is Orbbec's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Orbbec's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 56% gain to the company's top line. As a result, it also grew revenue by 19% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 44% over the next year. With the industry only predicted to deliver 26%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Orbbec'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.

The Bottom Line On Orbbec's P/S

The strong share price surge has lead to Orbbec'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 Orbbec shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

Plus, you should also learn about this 1 warning sign we've spotted with Orbbec.

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.