BAIC BluePark New Energy Technology Co.,Ltd. (SHSE:600733) shareholders have had their patience rewarded with a 27% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 25% is also fairly reasonable.

After such a large jump in price, given close to half the companies operating in China's Auto industry have price-to-sales ratios (or "P/S") below 1.9x, you may consider BAIC BluePark New Energy TechnologyLtd as a stock to potentially avoid with its 3.2x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

What Does BAIC BluePark New Energy TechnologyLtd's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, BAIC BluePark New Energy TechnologyLtd has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For BAIC BluePark New Energy TechnologyLtd?

In order to justify its P/S ratio, BAIC BluePark New Energy TechnologyLtd would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 58% last year. The strong recent performance means it was also able to grow revenue by 37% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next three years should generate growth of 49% each year as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 43% per year, which is noticeably less attractive.

With this information, we can see why BAIC BluePark New Energy TechnologyLtd 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 BAIC BluePark New Energy TechnologyLtd's P/S Mean For Investors?

BAIC BluePark New Energy TechnologyLtd 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 BAIC BluePark New Energy TechnologyLtd'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 the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

And what about other risks? Every company has them, and we've spotted 3 warning signs for BAIC BluePark New Energy TechnologyLtd (of which 1 is significant!) you should know about.

If these risks are making you reconsider your opinion on BAIC BluePark New Energy TechnologyLtd, 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.