Shinfox Energy Co., Ltd. (TWSE:6806) Looks Just Right With A 26% Price Jump

Shinfox Energy Co., Ltd. (TWSE:6806) shareholders have had their patience rewarded with a 26% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 60% in the last year.

After such a large jump in price, given close to half the companies operating in Taiwan's Renewable Energy industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider Shinfox Energy as a stock to potentially avoid with its 4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Shinfox Energy

How Shinfox Energy Has Been Performing

There hasn't been much to differentiate Shinfox Energy's and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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

Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Shinfox Energy would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 45% last year. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 186% as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.

In light of this, it's understandable that Shinfox Energy's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

Shinfox Energy shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

As we suspected, our examination of Shinfox Energy's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Before you take the next step, you should know about the 3 warning signs for Shinfox Energy (2 can't be ignored!) that we have uncovered.

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.