When you see that almost half of the companies in the Electrical industry in China have price-to-sales ratios (or "P/S") below 2.3x, Hiconics Eco-energy Technology Co., Ltd. (SZSE:300048) looks to be giving off some sell signals with its 3.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Hiconics Eco-energy Technology

What Does Hiconics Eco-energy Technology's Recent Performance Look Like?

Hiconics Eco-energy Technology could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to undergo a reversal of fortunes, which has elevated the P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

How Is Hiconics Eco-energy Technology's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Hiconics Eco-energy Technology's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 15% last year. Still, revenue has barely risen at all from three years ago in total, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Looking ahead now, revenue is anticipated to climb by 109% during the coming year according to the dual analysts following the company. That's shaping up to be materially higher than the 29% growth forecast for the broader industry.

In light of this, it's understandable that Hiconics Eco-energy Technology'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 Bottom Line On Hiconics Eco-energy 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 Hiconics Eco-energy Technology 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. It's hard to see the share price falling strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Hiconics Eco-energy Technology with six simple checks will allow you to discover any risks that could be an issue.

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.