Subdued Growth No Barrier To Jiangsu Maixinlin Aviation Science and Technology Corp. (SHSE:688685) With Shares Advancing 29%

The Jiangsu Maixinlin Aviation Science and Technology Corp. (SHSE:688685) share price has done very well over the last month, posting an excellent gain of 29%. Looking back a bit further, it's encouraging to see the stock is up 93% in the last year.

After such a large jump in price, given around half the companies in China's Aerospace & Defense industry have price-to-sales ratios (or "P/S") below 5.7x, you may consider Jiangsu Maixinlin Aviation Science and Technology as a stock to avoid entirely with its 13x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

View our latest analysis for Jiangsu Maixinlin Aviation Science and Technology

What Does Jiangsu Maixinlin Aviation Science and Technology's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Jiangsu Maixinlin Aviation Science and Technology over the last year, which is not ideal at all. Perhaps the market believes the company can do enough to outperform the rest of the industry in the near future, which is keeping the P/S ratio high. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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 Maixinlin Aviation Science and Technology's earnings, revenue and cash flow.

How Is Jiangsu Maixinlin Aviation Science and Technology's Revenue Growth Trending?

In order to justify its P/S ratio, Jiangsu Maixinlin Aviation Science and Technology would need to produce outstanding growth that's well in excess of the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 1.6%. Regardless, revenue has managed to lift by a handy 6.7% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 39% shows it's noticeably less attractive.

In light of this, it's alarming that Jiangsu Maixinlin Aviation Science and Technology's P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On Jiangsu Maixinlin Aviation Science and Technology's P/S

Shares in Jiangsu Maixinlin Aviation Science and Technology have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

The fact that Jiangsu Maixinlin Aviation Science and Technology currently trades on a higher P/S relative to the industry is an oddity, since its recent three-year growth is lower than the wider industry forecast. Right now we aren't comfortable with the high P/S as this revenue performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these the share price as being reasonable.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Jiangsu Maixinlin Aviation Science and Technology (3 are concerning!) that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.