When you see that almost half of the companies in the Software industry in China have price-to-sales ratios (or "P/S") below 6.6x, Beijing Deep Glint Technology Co., Ltd. (SHSE:688207) looks to be giving off strong sell signals with its 15.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
Check out our latest analysis for Beijing Deep Glint Technology
How Has Beijing Deep Glint Technology Performed Recently?
Beijing Deep Glint Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.
Keen to find out how analysts think Beijing Deep Glint Technology's future stacks up against the industry? In that case, our free report is a great place to start.Is There Enough Revenue Growth Forecasted For Beijing Deep Glint Technology?
The only time you'd be truly comfortable seeing a P/S as steep as Beijing Deep Glint Technology's is when the company's growth is on track to outshine the industry decidedly.
Retrospectively, the last year delivered a decent 9.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 58% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.
Looking ahead now, revenue is anticipated to climb by 43% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 37% growth forecast for the broader industry.
With this in mind, it's not hard to understand why Beijing Deep Glint Technology's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
What We Can Learn From Beijing Deep Glint Technology's P/S?
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.
Our look into Beijing Deep Glint Technology shows that its P/S ratio remains high on the merit of its strong future revenues. 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.
You should always think about risks. Case in point, we've spotted 2 warning signs for Beijing Deep Glint Technology you should be aware of.
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.