Market Participants Recognise Guoanda Co., Ltd.'s (SZSE:300902) Revenues Pushing Shares 34% Higher

Guoanda Co., Ltd. (SZSE:300902) shares have had a really impressive month, gaining 34% after a shaky period beforehand. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 3.9% over the last year.

Since its price has surged higher, Guoanda may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 8.7x, when you consider almost half of the companies in the Electronic industry in China have P/S ratios under 4x 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.

See our latest analysis for Guoanda

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

Recent times have been advantageous for Guoanda as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

How Is Guoanda's Revenue Growth Trending?

In order to justify its P/S ratio, Guoanda would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 100% last year. Pleasingly, revenue has also lifted 45% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 45% as estimated by the one analyst watching the company. With the industry only predicted to deliver 27%, the company is positioned for a stronger revenue result.

With this information, we can see why Guoanda 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 Guoanda's P/S

Shares in Guoanda have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Our look into Guoanda 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.

Plus, you should also learn about these 2 warning signs we've spotted with Guoanda (including 1 which shouldn't be ignored).

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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.