Jiangsu Boxin Investing&Holdings Co.,Ltd.'s (SHSE:600083) P/S Is Still On The Mark Following 47% Share Price Bounce

Jiangsu Boxin Investing&Holdings Co.,Ltd. (SHSE:600083) shareholders are no doubt pleased to see that the share price has bounced 47% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 17% in the last twelve months.

After such a large jump in price, when almost half of the companies in China's Trade Distributors industry have price-to-sales ratios (or "P/S") below 0.7x, you may consider Jiangsu Boxin Investing&HoldingsLtd as a stock not worth researching with its 4.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Jiangsu Boxin Investing&HoldingsLtd

How Has Jiangsu Boxin Investing&HoldingsLtd Performed Recently?

As an illustration, revenue has deteriorated at Jiangsu Boxin Investing&HoldingsLtd over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jiangsu Boxin Investing&HoldingsLtd will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Jiangsu Boxin Investing&HoldingsLtd?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Jiangsu Boxin Investing&HoldingsLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 34% decrease to the company's top line. The latest three year period has seen an incredible overall rise in revenue, a stark contrast to 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.

Comparing that to the industry, which is only predicted to deliver 17% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we can see why Jiangsu Boxin Investing&HoldingsLtd 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.

The Bottom Line On Jiangsu Boxin Investing&HoldingsLtd's P/S

Jiangsu Boxin Investing&HoldingsLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

As we suspected, our examination of Jiangsu Boxin Investing&HoldingsLtd revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

Having said that, be aware Jiangsu Boxin Investing&HoldingsLtd is showing 1 warning sign in our investment analysis, you should know about.

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.