China Express Airlines Co.,LTD (SZSE:002928) Not Lagging Industry On Growth Or Pricing

China Express Airlines Co.,LTD's (SZSE:002928) price-to-sales (or "P/S") ratio of 1.5x may not look like an appealing investment opportunity when you consider close to half the companies in the Airlines industry in China have P/S ratios below 0.6x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for China Express AirlinesLTD

What Does China Express AirlinesLTD's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, China Express AirlinesLTD has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on China Express AirlinesLTD.

Is There Enough Revenue Growth Forecasted For China Express AirlinesLTD?

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

Retrospectively, the last year delivered an exceptional 44% gain to the company's top line. The latest three year period has also seen an excellent 38% 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.

Turning to the outlook, the next year should generate growth of 24% as estimated by the seven analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 9.3%, which is noticeably less attractive.

In light of this, it's understandable that China Express AirlinesLTD'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

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.

As we suspected, our examination of China Express AirlinesLTD's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

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

If these risks are making you reconsider your opinion on China Express AirlinesLTD, 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.