Investors Aren't Entirely Convinced By Super Telecom Co.,Ltd's (SHSE:603322) Revenues

You may think that with a price-to-sales (or "P/S") ratio of 2.6x Super Telecom Co.,Ltd (SHSE:603322) is a stock worth checking out, seeing as almost half of all the Telecom companies in China have P/S ratios greater than 4x and even P/S higher than 7x 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 limited.

See our latest analysis for Super TelecomLtd

What Does Super TelecomLtd's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Super TelecomLtd has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Want the full picture on analyst estimates for the company? Then our free report on Super TelecomLtd will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Super TelecomLtd?

The only time you'd be truly comfortable seeing a P/S as low as Super TelecomLtd's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. The latest three year period has also seen an excellent 72% overall rise in revenue, aided by its short-term performance. 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 27% as estimated by the only analyst watching the company. That's shaping up to be materially higher than the 20% growth forecast for the broader industry.

In light of this, it's peculiar that Super TelecomLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Super TelecomLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Before you settle on your opinion, we've discovered 1 warning sign for Super TelecomLtd that you should be aware of.

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.