Vanjee Technology Co., Ltd. (SZSE:300552) shareholders are no doubt pleased to see that the share price has bounced 30% in the last month, although it is still struggling to make up recently lost ground. The last 30 days bring the annual gain to a very sharp 76%.

Since its price has surged higher, when almost half of the companies in China's Electronic industry have price-to-sales ratios (or "P/S") below 3.6x, you may consider Vanjee Technology as a stock not worth researching with its 8.2x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

How Vanjee Technology Has Been Performing

Vanjee Technology's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Enough Revenue Growth Forecasted For Vanjee Technology?

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

Retrospectively, the last year delivered a decent 9.6% gain to the company's revenues. Still, lamentably revenue has fallen 27% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 52% as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 26% growth forecast for the broader industry.

With this information, we can see why Vanjee Technology 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.

What We Can Learn From Vanjee Technology's P/S?

Shares in Vanjee Technology 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.

Our look into Vanjee Technology shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You should always think about risks. Case in point, we've spotted 1 warning sign for Vanjee Technology you should be aware of.

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.