Guangzhou Baiyun International Airport Company Limited's (SHSE:600004) Earnings Haven't Escaped The Attention Of Investors

When close to half the companies in the Infrastructure industry in China have price-to-sales ratios (or "P/S") below 2.7x, you may consider Guangzhou Baiyun International Airport Company Limited (SHSE:600004) as a stock to potentially avoid with its 3.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Guangzhou Baiyun International Airport

What Does Guangzhou Baiyun International Airport's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Guangzhou Baiyun International Airport has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. 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 Guangzhou Baiyun International Airport's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The High P/S Ratio?

Guangzhou Baiyun International Airport's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 65%. The latest three year period has also seen an excellent 32% overall rise in revenue, aided by its short-term performance. 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 analysts covering the company suggest revenue should grow by 15% over the next year. With the industry only predicted to deliver 9.2%, the company is positioned for a stronger revenue result.

With this in mind, it's not hard to understand why Guangzhou Baiyun International Airport'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.

The Bottom Line On Guangzhou Baiyun International Airport's P/S

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.

We've established that Guangzhou Baiyun International Airport maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Infrastructure industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - Guangzhou Baiyun International Airport has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Guangzhou Baiyun International Airport, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.