Dalian Sunasia Tourism Holding CO.,LTD (SHSE:600593) shares have continued their recent momentum with a 71% gain in the last month alone. The last month tops off a massive increase of 123% in the last year.

Following the firm bounce in price, you could be forgiven for thinking Dalian Sunasia Tourism HoldingLTD is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 10.5x, considering almost half the companies in China's Hospitality industry have P/S ratios below 6x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Dalian Sunasia Tourism HoldingLTD

What Does Dalian Sunasia Tourism HoldingLTD's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Dalian Sunasia Tourism HoldingLTD has been doing very well. Perhaps the market is expecting future revenue performance to outperform the wider market, which has seemingly got people interested in the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Dalian Sunasia Tourism HoldingLTD would need to produce outstanding growth that's well in excess of the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 166%. The latest three year period has also seen an incredible overall rise in revenue, aided by its incredible short-term performance. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

When compared to the industry's one-year growth forecast of 38%, the most recent medium-term revenue trajectory is noticeably more alluring

In light of this, it's understandable that Dalian Sunasia Tourism HoldingLTD's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

Shares in Dalian Sunasia Tourism HoldingLTD have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Dalian Sunasia Tourism HoldingLTD maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

You should always think about risks. Case in point, we've spotted 2 warning signs for Dalian Sunasia Tourism HoldingLTD you should be aware of, and 1 of them is a bit unpleasant.

If you're unsure about the strength of Dalian Sunasia Tourism HoldingLTD's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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