Despite an already strong run, Jiangsu Gian Technology Co., Ltd. (SZSE:300709) shares have been powering on, with a gain of 43% in the last thirty days. The last 30 days bring the annual gain to a very sharp 97%.

Since its price has surged higher, when almost half of the companies in China's Electrical industry have price-to-sales ratios (or "P/S") below 2.4x, you may consider Jiangsu Gian Technology as a stock probably not worth researching with its 3.6x 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 as high as it is.

How Jiangsu Gian Technology Has Been Performing

Jiangsu Gian Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

How Is Jiangsu Gian Technology's Revenue Growth Trending?

In order to justify its P/S ratio, Jiangsu Gian Technology would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a decent 5.5% gain to the company's revenues. Revenue has also lifted 25% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 32% over the next year. That's shaping up to be materially higher than the 23% growth forecast for the broader industry.

In light of this, it's understandable that Jiangsu Gian Technology's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Jiangsu Gian Technology's P/S Mean For Investors?

Jiangsu Gian Technology shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Jiangsu Gian Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electrical industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Jiangsu Gian Technology.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.