Beijing Tianyishangjia New Material Corp., Ltd.'s (SHSE:688033) Shares Not Telling The Full Story

You may think that with a price-to-sales (or "P/S") ratio of 1.7x Beijing Tianyishangjia New Material Corp., Ltd. (SHSE:688033) is a stock worth checking out, seeing as almost half of all the Machinery companies in China have P/S ratios greater than 2.5x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Beijing Tianyishangjia New Material

How Beijing Tianyishangjia New Material Has Been Performing

Beijing Tianyishangjia New Material certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

Keen to find out how analysts think Beijing Tianyishangjia New Material'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?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Beijing Tianyishangjia New Material's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 91% gain to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, thanks in part to the last 12 months of revenue growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 129% over the next year. That's shaping up to be materially higher than the 24% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Beijing Tianyishangjia New Material's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Beijing Tianyishangjia New Material's P/S Mean For Investors?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

To us, it seems Beijing Tianyishangjia New Material currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Beijing Tianyishangjia New Material that you need to be mindful of.

If you're unsure about the strength of Beijing Tianyishangjia New Material'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.