Shandong Yisheng Livestock & Poultry Breeding Co., Ltd.'s (SZSE:002458) price-to-sales (or "P/S") ratio of 3.4x may not look like an appealing investment opportunity when you consider close to half the companies in the Food industry in China have P/S ratios below 2.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Shandong Yisheng Livestock & Poultry Breeding

How Shandong Yisheng Livestock & Poultry Breeding Has Been Performing

With revenue growth that's superior to most other companies of late, Shandong Yisheng Livestock & Poultry Breeding 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.

How Is Shandong Yisheng Livestock & Poultry Breeding's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Shandong Yisheng Livestock & Poultry Breeding's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 84%. Revenue has also lifted 26% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 23% as estimated by the nine analysts watching the company. With the industry only predicted to deliver 17%, the company is positioned for a stronger revenue result.

With this information, we can see why Shandong Yisheng Livestock & Poultry Breeding 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 Key Takeaway

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 Shandong Yisheng Livestock & Poultry Breeding shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about this 1 warning sign we've spotted with Shandong Yisheng Livestock & Poultry Breeding.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.