Zhejiang Meorient Commerce Exhibition Inc. (SZSE:300795) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Looking back a bit further, it's encouraging to see the stock is up 38% in the last year.

After such a large jump in price, when almost half of the companies in China's Media industry have price-to-sales ratios (or "P/S") below 2.9x, you may consider Zhejiang Meorient Commerce Exhibition as a stock not worth researching with its 8.5x 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.

View our latest analysis for Zhejiang Meorient Commerce Exhibition

What Does Zhejiang Meorient Commerce Exhibition's Recent Performance Look Like?

Zhejiang Meorient Commerce Exhibition certainly has been doing a good job lately as it's been growing revenue more than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. If not, then existing shareholders might be a little nervous about the viability of the share price.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Zhejiang Meorient Commerce Exhibition's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 201% gain to the company's top line. The latest three year period has also seen an excellent 196% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 46% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 22% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Zhejiang Meorient Commerce Exhibition'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.

The Bottom Line On Zhejiang Meorient Commerce Exhibition's P/S

Shares in Zhejiang Meorient Commerce Exhibition have seen a strong upwards swing lately, which has really helped boost its P/S figure. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Zhejiang Meorient Commerce Exhibition maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Media industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Zhejiang Meorient Commerce Exhibition with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Zhejiang Meorient Commerce Exhibition, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.