Investors Appear Satisfied With Beijing Airdoc Technology Co., Ltd.'s (HKG:2251) Prospects As Shares Rocket 33%

Despite an already strong run, Beijing Airdoc Technology Co., Ltd. (HKG:2251) shares have been powering on, with a gain of 33% in the last thirty days. Notwithstanding the latest gain, the annual share price return of 2.7% isn't as impressive.

Following the firm bounce in price, you could be forgiven for thinking Beijing Airdoc Technology is a stock not worth researching with a price-to-sales ratios (or "P/S") of 8.4x, considering almost half the companies in Hong Kong's Healthcare Services industry have P/S ratios below 5.7x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

View our latest analysis for Beijing Airdoc Technology

How Has Beijing Airdoc Technology Performed Recently?

With revenue growth that's superior to most other companies of late, Beijing Airdoc Technology has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Beijing Airdoc Technology will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Beijing Airdoc Technology's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 79%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next three years should generate growth of 51% per year as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 16% per annum growth forecast for the broader industry.

With this information, we can see why Beijing Airdoc Technology is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Beijing Airdoc Technology's P/S?

The large bounce in Beijing Airdoc Technology's shares has lifted the company's P/S handsomely. 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.

As we suspected, our examination of Beijing Airdoc Technology's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for Beijing Airdoc Technology with six simple checks.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.