A Piece Of The Puzzle Missing From Zhejiang Meili High Technology Co., Ltd.'s (SZSE:300611) 37% Share Price Climb

Those holding Zhejiang Meili High Technology Co., Ltd. (SZSE:300611) shares would be relieved that the share price has rebounded 37% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 8.0% over the last year.

Although its price has surged higher, it would still be understandable if you think Zhejiang Meili High Technology is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1.4x, considering almost half the companies in China's Auto Components industry have P/S ratios above 2.3x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Zhejiang Meili High Technology

What Does Zhejiang Meili High Technology's Recent Performance Look Like?

Revenue has risen firmly for Zhejiang Meili High Technology recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Zhejiang Meili High Technology will help you shine a light on its historical performance.

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

Zhejiang Meili High Technology's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 22% last year. The strong recent performance means it was also able to grow revenue by 99% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 25% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this in consideration, we find it intriguing that Zhejiang Meili High Technology's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

The Key Takeaway

Zhejiang Meili High Technology's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

The fact that Zhejiang Meili High Technology currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. medium-term

There are also other vital risk factors to consider and we've discovered 3 warning signs for Zhejiang Meili High Technology (1 is potentially serious!) that you should be aware of before investing here.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.