Revenues Tell The Story For Orbbec Inc. (SHSE:688322) As Its Stock Soars 58%

Orbbec Inc. (SHSE:688322) shares have continued their recent momentum with a 58% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 39% in the last year.

Following the firm bounce in price, Orbbec's price-to-sales (or "P/S") ratio of 44.2x 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 4.3x 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

How Orbbec Has Been Performing

With revenue growth that's superior to most other companies of late, Orbbec has been doing relatively well. 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Orbbec.

How Is Orbbec's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Orbbec's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. However, this wasn't enough as the latest three year period has seen the company endure a nasty 4.8% drop in revenue in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 66% 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. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Orbbec's P/S?

Shares in Orbbec have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Having said that, be aware Orbbec is showing 1 warning sign in our investment analysis, you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.