Sichuan Haite High-tech Co.,Ltd (SZSE:002023) Stocks Shoot Up 31% But Its P/S Still Looks Reasonable

Sichuan Haite High-tech Co.,Ltd (SZSE:002023) shareholders would be excited to see that the share price has had a great month, posting a 31% gain and recovering from prior weakness. Taking a wider view, although not as strong as the last month, the full year gain of 15% is also fairly reasonable.

After such a large jump in price, given around half the companies in China's Infrastructure industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider Sichuan Haite High-techLtd as a stock to avoid entirely with its 6.8x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Sichuan Haite High-techLtd

What Does Sichuan Haite High-techLtd's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Sichuan Haite High-techLtd has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. 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 Sichuan Haite High-techLtd.

How Is Sichuan Haite High-techLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Sichuan Haite High-techLtd 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 23% last year. As a result, it also grew revenue by 24% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.4%, which is noticeably less attractive.

With this information, we can see why Sichuan Haite High-techLtd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Sichuan Haite High-techLtd's P/S?

Sichuan Haite High-techLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look into Sichuan Haite High-techLtd shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Sichuan Haite High-techLtd that you should be aware of.

If these risks are making you reconsider your opinion on Sichuan Haite High-techLtd, 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.