Despite an already strong run, INESA Intelligent Tech Inc. (SHSE:600602) shares have been powering on, with a gain of 28% in the last thirty days. The last 30 days bring the annual gain to a very sharp 31%.

Although its price has surged higher, you could still be forgiven for feeling indifferent about INESA Intelligent Tech's P/S ratio of 4.3x, since the median price-to-sales (or "P/S") ratio for the IT industry in China is also close to 4.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does INESA Intelligent Tech's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, INESA Intelligent Tech has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Some Revenue Growth Forecasted For INESA Intelligent Tech?

The only time you'd be comfortable seeing a P/S like INESA Intelligent Tech's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 8.3% gain to the company's revenues. The latest three year period has also seen a 10% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 22% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 19%, which is noticeably less attractive.

In light of this, it's curious that INESA Intelligent Tech's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Key Takeaway

Its shares have lifted substantially and now INESA Intelligent Tech's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Despite enticing revenue growth figures that outpace the industry, INESA Intelligent Tech's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for INESA Intelligent Tech with six simple checks on some of these key factors.

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.