T&S Communications Co.,Ltd.'s (SZSE:300570) P/S Is Still On The Mark Following 34% Share Price Bounce

Despite an already strong run, T&S Communications Co.,Ltd. (SZSE:300570) shares have been powering on, with a gain of 34% in the last thirty days. The last month tops off a massive increase of 165% in the last year.

Following the firm bounce in price, T&S CommunicationsLtd may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 17.5x, when you consider almost half of the companies in the Communications industry in China have P/S ratios under 4.6x and even P/S lower than 2x aren't out of the ordinary. 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.

View our latest analysis for T&S CommunicationsLtd

What Does T&S CommunicationsLtd's P/S Mean For Shareholders?

T&S CommunicationsLtd 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. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think T&S CommunicationsLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For T&S CommunicationsLtd?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like T&S CommunicationsLtd's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 38% last year. The strong recent performance means it was also able to grow revenue by 76% 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.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 75% over the next year. With the industry only predicted to deliver 37%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that T&S CommunicationsLtd's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

T&S CommunicationsLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that T&S CommunicationsLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Communications industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

We don't want to rain on the parade too much, but we did also find 1 warning sign for T&S CommunicationsLtd that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.