After Leaping 27% Fortune Electric Co., Ltd. (TWSE:1519) Shares Are Not Flying Under The Radar

Despite an already strong run, Fortune Electric Co., Ltd. (TWSE:1519) shares have been powering on, with a gain of 27% in the last thirty days. The last 30 days were the cherry on top of the stock's 800% gain in the last year, which is nothing short of spectacular.

Following the firm bounce in price, given around half the companies in Taiwan's Electrical industry have price-to-sales ratios (or "P/S") below 1.8x, you may consider Fortune Electric as a stock to avoid entirely with its 16x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Fortune Electric

What Does Fortune Electric's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Fortune Electric has been doing relatively well. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Fortune Electric.

How Is Fortune Electric's Revenue Growth Trending?

Fortune Electric's 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 grew revenue by an impressive 79% last year. The strong recent performance means it was also able to grow revenue by 64% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 39% during the coming year according to the three analysts following the company. With the industry only predicted to deliver 16%, the company is positioned for a stronger revenue result.

With this information, we can see why Fortune Electric 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.

The Final Word

Shares in Fortune Electric 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.

Our look into Fortune Electric shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for Fortune Electric that you need to take into consideration.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.