When you see that almost half of the companies in the Chemicals industry in China have price-to-sales ratios (or "P/S") below 2.3x, Aerospace Intelligent Manufacturing Technology Co., Ltd. (SZSE:300446) looks to be giving off strong sell signals with its 14.1x 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.

View our latest analysis for Aerospace Intelligent Manufacturing Technology

How Has Aerospace Intelligent Manufacturing Technology Performed Recently?

For instance, Aerospace Intelligent Manufacturing Technology's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

What Are Revenue Growth Metrics Telling Us About The High P/S?

In order to justify its P/S ratio, Aerospace Intelligent Manufacturing Technology would need to produce outstanding growth that's well in excess of the industry.

Retrospectively, the last year delivered a frustrating 73% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Therefore, it's fair to say the revenue growth recently has been superb for the company, but investors will want to ask why it is now in decline.

When compared to the industry's one-year growth forecast of 31%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we can see why Aerospace Intelligent Manufacturing Technology is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Aerospace Intelligent Manufacturing Technology's P/S?

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.

It's no surprise that Aerospace Intelligent Manufacturing Technology can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about these 3 warning signs we've spotted with Aerospace Intelligent Manufacturing Technology (including 2 which are potentially serious).

If these risks are making you reconsider your opinion on Aerospace Intelligent Manufacturing Technology, 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.