Beijing Capital International Airport Company Limited (HKG:694) shareholders would be excited to see that the share price has had a great month, posting a 44% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 3.3% in the last twelve months.
After such a large jump in price, when almost half of the companies in Hong Kong's Infrastructure industry have price-to-sales ratios (or "P/S") below 1.5x, you may consider Beijing Capital International Airport as a stock probably not worth researching with its 2.6x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.
Check out our latest analysis for Beijing Capital International Airport
How Beijing Capital International Airport Has Been Performing
Recent times have been advantageous for Beijing Capital International Airport as its revenues have been rising faster than most other companies. The P/S is probably high because investors think this strong revenue performance will continue. However, if this isn't the case, investors might get caught out paying too much for the stock.
Keen to find out how analysts think Beijing Capital International Airport's future stacks up against the industry? In that case, our free report is a great place to start.Is There Enough Revenue Growth Forecasted For Beijing Capital International Airport?
The only time you'd be truly comfortable seeing a P/S as high as Beijing Capital International Airport's is when the company's growth is on track to outshine the industry.
Retrospectively, the last year delivered an exceptional 69% gain to the company's top line. Pleasingly, revenue has also lifted 57% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.
Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 16% per year over the next three years. That's shaping up to be materially higher than the 14% per annum growth forecast for the broader industry.
With this information, we can see why Beijing Capital International Airport 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.
The Bottom Line On Beijing Capital International Airport's P/S
The large bounce in Beijing Capital International Airport's shares has lifted the company's P/S handsomely. 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.
As we suspected, our examination of Beijing Capital International Airport'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. It's hard to see the share price falling strongly in the near future under these circumstances.
Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Beijing Capital International Airport that you should be aware of.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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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.