Investors Appear Satisfied With Guangdong Meiyanjixiang Hydropower Co.,Ltd.'s (SHSE:600868) Prospects As Shares Rocket 31%

Despite an already strong run, Guangdong Meiyanjixiang Hydropower Co.,Ltd. (SHSE:600868) shares have been powering on, with a gain of 31% in the last thirty days. The last 30 days bring the annual gain to a very sharp 28%.

After such a large jump in price, when almost half of the companies in China's Renewable Energy industry have price-to-sales ratios (or "P/S") below 2.3x, you may consider Guangdong Meiyanjixiang HydropowerLtd as a stock not worth researching with its 18.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Guangdong Meiyanjixiang HydropowerLtd

What Does Guangdong Meiyanjixiang HydropowerLtd's P/S Mean For Shareholders?

For instance, Guangdong Meiyanjixiang HydropowerLtd's receding revenue in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Guangdong Meiyanjixiang HydropowerLtd's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Guangdong Meiyanjixiang HydropowerLtd would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.8%. Even so, admirably revenue has lifted 101% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

When compared to the industry's one-year growth forecast of 8.1%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why Guangdong Meiyanjixiang HydropowerLtd's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Guangdong Meiyanjixiang HydropowerLtd's P/S

Shares in Guangdong Meiyanjixiang HydropowerLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It's no surprise that Guangdong Meiyanjixiang HydropowerLtd can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Guangdong Meiyanjixiang HydropowerLtd 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.