What You Can Learn From Guangzhou Baiyun International Airport Company Limited's (SHSE:600004) P/S

Guangzhou Baiyun International Airport Company Limited's (SHSE:600004) price-to-sales (or "P/S") ratio of 4.8x may not look like an appealing investment opportunity when you consider close to half the companies in the Infrastructure industry in China have P/S ratios below 2.8x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Guangzhou Baiyun International Airport

What Does Guangzhou Baiyun International Airport's Recent Performance Look Like?

Recent times haven't been great for Guangzhou Baiyun International Airport as its revenue has been rising slower than most other companies. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. If not, then existing shareholders may be very nervous about the viability of the share price.

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.

Is There Enough Revenue Growth Forecasted For Guangzhou Baiyun International Airport?

The only time you'd be truly comfortable seeing a P/S as high as Guangzhou Baiyun International Airport's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a decent 8.5% gain to the company's revenues. However, this wasn't enough as the latest three year period has seen an unpleasant 10% overall 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 45% as estimated by the twelve analysts watching the company. With the industry only predicted to deliver 16%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Guangzhou Baiyun International Airport's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

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.

Our look into Guangzhou Baiyun International Airport shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Guangzhou Baiyun International Airport with six simple checks.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.