Market Participants Recognise Central New Energy Holding Group Limited's (HKG:1735) Revenues Pushing Shares 27% Higher

Despite an already strong run, Central New Energy Holding Group Limited (HKG:1735) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days bring the annual gain to a very sharp 38%.

Following the firm bounce in price, when almost half of the companies in Hong Kong's Construction industry have price-to-sales ratios (or "P/S") below 0.3x, you may consider Central New Energy Holding Group as a stock not worth researching with its 9.9x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Central New Energy Holding Group

How Has Central New Energy Holding Group Performed Recently?

With revenue growth that's exceedingly strong of late, Central New Energy Holding Group has been doing very well. The P/S ratio is probably high because investors think this strong revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Central New Energy Holding Group will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Central New Energy Holding Group?

The only time you'd be truly comfortable seeing a P/S as steep as Central New Energy Holding Group's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 102% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 12% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Central New Energy Holding Group is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does Central New Energy Holding Group's P/S Mean For Investors?

Shares in Central New Energy Holding Group have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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 Central New Energy Holding Group revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Central New Energy Holding Group with six simple checks on some of these key factors.

If you're unsure about the strength of Central New Energy Holding Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.