Juneyao Airlines Co., Ltd's (SHSE:603885) Earnings Haven't Escaped The Attention Of Investors

When close to half the companies in the Airlines industry in China have price-to-sales ratios (or "P/S") below 0.9x, you may consider Juneyao Airlines Co., Ltd (SHSE:603885) as a stock to potentially avoid with its 1.5x P/S ratio. 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 Juneyao Airlines

How Has Juneyao Airlines Performed Recently?

With revenue growth that's superior to most other companies of late, Juneyao Airlines has been doing relatively well. 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.

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

Is There Enough Revenue Growth Forecasted For Juneyao Airlines?

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

Taking a look back first, we see that the company grew revenue by an impressive 93% last year. The strong recent performance means it was also able to grow revenue by 61% 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.

Turning to the outlook, the next year should generate growth of 35% as estimated by the analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 24%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Juneyao Airlines' 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 Juneyao Airlines' P/S

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 Juneyao Airlines 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. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Juneyao Airlines that you should be aware of.

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.