Ningbo Jifeng Auto Parts Co., Ltd.'s (SHSE:603997) Share Price Is Matching Sentiment Around Its Revenues

Ningbo Jifeng Auto Parts Co., Ltd.'s (SHSE:603997) price-to-sales (or "P/S") ratio of 0.6x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Auto Components industry in China have P/S ratios greater than 1.9x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Ningbo Jifeng Auto Parts

How Has Ningbo Jifeng Auto Parts Performed Recently?

With revenue growth that's inferior to most other companies of late, Ningbo Jifeng Auto Parts has been relatively sluggish. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Ningbo Jifeng Auto Parts will help you uncover what's on the horizon.

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

Ningbo Jifeng Auto Parts' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 15%. The strong recent performance means it was also able to grow revenue by 33% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the ten analysts covering the company suggest revenue should grow by 19% over the next year. With the industry predicted to deliver 24% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Ningbo Jifeng Auto Parts is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Ningbo Jifeng Auto Parts' P/S Mean For Investors?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Ningbo Jifeng Auto Parts maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you settle on your opinion, we've discovered 2 warning signs for Ningbo Jifeng Auto Parts (1 doesn't sit too well with us!) that you should be aware of.

If these risks are making you reconsider your opinion on Ningbo Jifeng Auto Parts, 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.