KBC Corporation, Ltd. (SHSE:688598) shares have continued their recent momentum with a 41% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 48% in the last twelve months.

After such a large jump in price, when almost half of the companies in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2.4x, you may consider KBC Corporation as a stock not worth researching with its 9.3x 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 so lofty.

How KBC Corporation Has Been Performing

KBC Corporation 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. 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 KBC Corporation?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like KBC Corporation's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 46% decrease to the company's top line. As a result, revenue from three years ago have also fallen 38% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 205% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 25% growth forecast for the broader industry.

In light of this, it's understandable that KBC Corporation'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.

The Final Word

Shares in KBC Corporation 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 KBC Corporation shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. 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 KBC Corporation that you should be aware of.

If these risks are making you reconsider your opinion on KBC Corporation, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.