Investors Still Aren't Entirely Convinced By Beijing Tianyishangjia New Material Corp., Ltd.'s (SHSE:688033) Revenues Despite 32% Price Jump

Beijing Tianyishangjia New Material Corp., Ltd. (SHSE:688033) shares have had a really impressive month, gaining 32% after a shaky period beforehand. But the last month did very little to improve the 64% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Beijing Tianyishangjia New Material's price-to-sales (or "P/S") ratio of 2.2x is worth a mention when the median P/S in China's Machinery industry is similar at about 2.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Beijing Tianyishangjia New Material

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

Beijing Tianyishangjia New Material has been doing a decent job lately as it's been growing revenue at a reasonable pace. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Beijing Tianyishangjia New Material's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Beijing Tianyishangjia New Material?

In order to justify its P/S ratio, Beijing Tianyishangjia New Material would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 6.0%. Pleasingly, revenue has also lifted 233% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

When compared to the industry's one-year growth forecast of 23%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Beijing Tianyishangjia New Material is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

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

Beijing Tianyishangjia New Material appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Beijing Tianyishangjia New Material currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. It'd be fair to assume that potential risks the company faces could be the contributing factor to the lower than expected P/S. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Beijing Tianyishangjia New Material (1 shouldn't be ignored!) 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.