Revenues Not Telling The Story For Jiangsu Jingyuan Environmental Protection Co.,Ltd. (SHSE:688096) After Shares Rise 25%

Jiangsu Jingyuan Environmental Protection Co.,Ltd. (SHSE:688096) shares have continued their recent momentum with a 25% gain in the last month alone. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.8% over the last year.

Although its price has surged higher, it's still not a stretch to say that Jiangsu Jingyuan Environmental ProtectionLtd's price-to-sales (or "P/S") ratio of 3.8x right now seems quite "middle-of-the-road" compared to the Machinery industry in China, where the median P/S ratio is around 3.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Jiangsu Jingyuan Environmental ProtectionLtd

How Has Jiangsu Jingyuan Environmental ProtectionLtd Performed Recently?

As an illustration, revenue has deteriorated at Jiangsu Jingyuan Environmental ProtectionLtd over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability 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 Jiangsu Jingyuan Environmental ProtectionLtd's earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Jiangsu Jingyuan Environmental ProtectionLtd?

In order to justify its P/S ratio, Jiangsu Jingyuan Environmental ProtectionLtd would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 25%. The last three years don't look nice either as the company has shrunk revenue by 9.6% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 25% shows it's an unpleasant look.

In light of this, it's somewhat alarming that Jiangsu Jingyuan Environmental ProtectionLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What We Can Learn From Jiangsu Jingyuan Environmental ProtectionLtd's P/S?

Jiangsu Jingyuan Environmental ProtectionLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our look at Jiangsu Jingyuan Environmental ProtectionLtd revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Plus, you should also learn about these 2 warning signs we've spotted with Jiangsu Jingyuan Environmental ProtectionLtd.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.