Guangdong Shenglu Telecommunication Tech. Co., Ltd. (SZSE:002446) shares have continued their recent momentum with a 29% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 14% in the last twelve months.

After such a large jump in price, when almost half of the companies in China's Communications industry have price-to-sales ratios (or "P/S") below 5.7x, you may consider Guangdong Shenglu Telecommunication Tech as a stock probably not worth researching with its 6.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

What Does Guangdong Shenglu Telecommunication Tech's P/S Mean For Shareholders?

Guangdong Shenglu Telecommunication Tech could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

How Is Guangdong Shenglu Telecommunication Tech's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Guangdong Shenglu Telecommunication Tech's is when the company's growth is on track to outshine the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 20%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 5.5% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 87% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 40%, which is noticeably less attractive.

With this information, we can see why Guangdong Shenglu Telecommunication Tech 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 Does Guangdong Shenglu Telecommunication Tech's P/S Mean For Investors?

Guangdong Shenglu Telecommunication Tech shares have taken a big step in a northerly direction, but its P/S is elevated as a result. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Guangdong Shenglu Telecommunication Tech's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Guangdong Shenglu Telecommunication Tech with six simple checks.

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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