Investors Appear Satisfied With Golden Solar New Energy Technology Holdings Limited's (HKG:1121) Prospects

Golden Solar New Energy Technology Holdings Limited's (HKG:1121) price-to-sales (or "P/S") ratio of 23.1x may look like a poor investment opportunity when you consider close to half the companies in the Luxury industry in Hong Kong 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 highly elevated P/S.

See our latest analysis for Golden Solar New Energy Technology Holdings

What Does Golden Solar New Energy Technology Holdings' Recent Performance Look Like?

The recent revenue growth at Golden Solar New Energy Technology Holdings would have to be considered satisfactory if not spectacular. It might be that many expect the reasonable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.

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 Golden Solar New Energy Technology Holdings' earnings, revenue and cash flow.

How Is Golden Solar New Energy Technology Holdings' Revenue Growth Trending?

Golden Solar New Energy Technology Holdings' P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 3.5% last year. Pleasingly, revenue has also lifted 151% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is only predicted to deliver 12% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why Golden Solar New Energy Technology Holdings 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.

The Key Takeaway

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that Golden Solar New Energy Technology Holdings 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 Golden Solar New Energy Technology Holdings 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.