SDIC Intelligence Xiamen Information Co., Ltd. (SZSE:300188) Looks Just Right With A 27% Price Jump

SDIC Intelligence Xiamen Information Co., Ltd. (SZSE:300188) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 21% in the last twelve months.

Since its price has surged higher, given close to half the companies operating in China's Electronic industry have price-to-sales ratios (or "P/S") below 3.3x, you may consider SDIC Intelligence Xiamen Information as a stock to potentially avoid with its 5.3x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for SDIC Intelligence Xiamen Information

What Does SDIC Intelligence Xiamen Information's Recent Performance Look Like?

Recent times haven't been great for SDIC Intelligence Xiamen Information as its revenue has been rising slower than most other companies. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. If not, then existing shareholders may be very nervous about the viability of the share price.

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

How Is SDIC Intelligence Xiamen Information's Revenue Growth Trending?

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

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. The lack of growth did nothing to help the company's aggregate three-year performance, which is an unsavory 19% drop in revenue. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 31% as estimated by the four analysts watching the company. With the industry only predicted to deliver 26%, the company is positioned for a stronger revenue result.

With this information, we can see why SDIC Intelligence Xiamen Information is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On SDIC Intelligence Xiamen Information's P/S

SDIC Intelligence Xiamen Information's P/S is on the rise since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of SDIC Intelligence Xiamen Information's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for SDIC Intelligence Xiamen Information with six simple checks on some of these key factors.

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

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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.