Revenues Tell The Story For International Entertainment Corporation (HKG:1009) As Its Stock Soars 30%

International Entertainment Corporation (HKG:1009) shareholders would be excited to see that the share price has had a great month, posting a 30% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 62%.

After such a large jump in price, when almost half of the companies in Hong Kong's Real Estate industry have price-to-sales ratios (or "P/S") below 0.6x, you may consider International Entertainment as a stock not worth researching with its 6.3x 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.

See our latest analysis for International Entertainment

What Does International Entertainment's P/S Mean For Shareholders?

International Entertainment certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. If not, then existing shareholders might 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 International Entertainment's earnings, revenue and cash flow.

Is There Enough Revenue Growth Forecasted For International Entertainment?

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

Retrospectively, the last year delivered an exceptional 46% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 117% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 3.9%, the most recent medium-term revenue trajectory is noticeably more alluring

With this in consideration, it's not hard to understand why International Entertainment's P/S is high relative to its industry peers. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

The Bottom Line On International Entertainment's P/S

International Entertainment's P/S has grown nicely over the last month thanks to a handy boost in the share price. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that International Entertainment maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for International Entertainment you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.