Despite an already strong run, Chongqing Mas Sci.&Tech.Co.,Ltd. (SZSE:300275) shares have been powering on, with a gain of 39% in the last thirty days. Taking a wider view, although not as strong as the last month, the full year gain of 20% is also fairly reasonable.

After such a large jump in price, you could be forgiven for thinking Chongqing Mas Sci.&Tech.Co.Ltd is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 9.6x, considering almost half the companies in China's Machinery industry have P/S ratios below 2.8x. 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.

What Does Chongqing Mas Sci.&Tech.Co.Ltd's P/S Mean For Shareholders?

There hasn't been much to differentiate Chongqing Mas Sci.&Tech.Co.Ltd's and the industry's revenue growth lately. One possibility is that the P/S ratio is high because investors think this modest revenue performance will accelerate. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For Chongqing Mas Sci.&Tech.Co.Ltd?

Chongqing Mas Sci.&Tech.Co.Ltd's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a decent 8.1% gain to the company's revenues. Pleasingly, revenue has also lifted 58% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 35% during the coming year according to the only analyst following the company. With the industry only predicted to deliver 23%, the company is positioned for a stronger revenue result.

With this information, we can see why Chongqing Mas Sci.&Tech.Co.Ltd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Chongqing Mas Sci.&Tech.Co.Ltd's P/S Mean For Investors?

Chongqing Mas Sci.&Tech.Co.Ltd's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of Chongqing Mas Sci.&Tech.Co.Ltd's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you settle on your opinion, we've discovered 1 warning sign for Chongqing Mas Sci.&Tech.Co.Ltd that 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.