Nuode New Materials Co.,Ltd.'s (SHSE:600110) Shares Leap 30% Yet They're Still Not Telling The Full Story

Despite an already strong run, Nuode New Materials Co.,Ltd. (SHSE:600110) shares have been powering on, with a gain of 30% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 26% over that time.

Although its price has surged higher, Nuode New MaterialsLtd's price-to-sales (or "P/S") ratio of 1.6x might still make it look like a buy right now compared to the Electrical industry in China, where around half of the companies have P/S ratios above 2.5x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Nuode New MaterialsLtd

What Does Nuode New MaterialsLtd's P/S Mean For Shareholders?

Nuode New MaterialsLtd hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Nuode New MaterialsLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Nuode New MaterialsLtd would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.3%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 20% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 43% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

In light of this, it's peculiar that Nuode New MaterialsLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Nuode New MaterialsLtd's P/S

The latest share price surge wasn't enough to lift Nuode New MaterialsLtd's P/S close to the industry median. 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.

Nuode New MaterialsLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 2 warning signs for Nuode New MaterialsLtd that we have uncovered.

If you're unsure about the strength of Nuode New MaterialsLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.