Despite an already strong run, Guangdong Insight Brand Marketing Group Co.,Ltd. (SZSE:300781) shares have been powering on, with a gain of 83% in the last thirty days. The annual gain comes to 169% following the latest surge, making investors sit up and take notice.

Following the firm bounce in price, given around half the companies in China's Media industry have price-to-sales ratios (or "P/S") below 3.2x, you may consider Guangdong Insight Brand Marketing GroupLtd as a stock to avoid entirely with its 11.1x 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.

Check out our latest analysis for Guangdong Insight Brand Marketing GroupLtd

How Has Guangdong Insight Brand Marketing GroupLtd Performed Recently?

As an illustration, revenue has deteriorated at Guangdong Insight Brand Marketing GroupLtd over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

How Is Guangdong Insight Brand Marketing GroupLtd's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Guangdong Insight Brand Marketing GroupLtd's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 11%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 65% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

This is in contrast to the rest of the industry, which is expected to grow by 21% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it worrying that Guangdong Insight Brand Marketing GroupLtd's P/S exceeds that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Guangdong Insight Brand Marketing GroupLtd's P/S

Guangdong Insight Brand Marketing GroupLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

The fact that Guangdong Insight Brand Marketing GroupLtd currently trades on a higher P/S relative to the industry is an oddity, since its recent three-year growth is lower than the wider industry forecast. When we see slower than industry revenue growth but an elevated P/S, there's considerable risk of the share price declining, sending the P/S lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these the share price as being reasonable.

You should always think about risks. Case in point, we've spotted 2 warning signs for Guangdong Insight Brand Marketing GroupLtd you should be aware of.

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.