Jiangsu Boamax Technologies Group Co.,Ltd. (SZSE:002514) Stock Rockets 49% As Investors Are Less Pessimistic Than Expected

Jiangsu Boamax Technologies Group Co.,Ltd. (SZSE:002514) shares have continued their recent momentum with a 49% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

Following the firm bounce in price, when almost half of the companies in China's Machinery industry have price-to-sales ratios (or "P/S") below 2.8x, you may consider Jiangsu Boamax Technologies GroupLtd as a stock not worth researching with its 12.5x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Jiangsu Boamax Technologies GroupLtd

What Does Jiangsu Boamax Technologies GroupLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Jiangsu Boamax Technologies GroupLtd over the last year, which is not ideal at all. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jiangsu Boamax Technologies GroupLtd will help you shine a light on its historical performance.

How Is Jiangsu Boamax Technologies GroupLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Jiangsu Boamax Technologies GroupLtd's is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered a frustrating 47% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 40% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we find it worrying that Jiangsu Boamax Technologies GroupLtd's P/S exceeds that of its industry peers. 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. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

The Bottom Line On Jiangsu Boamax Technologies GroupLtd's P/S

Shares in Jiangsu Boamax Technologies GroupLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Jiangsu Boamax Technologies GroupLtd currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. When we see revenue heading backwards and underperforming the industry forecasts, we feel the possibility of the share price declining is very real, bringing the P/S back into the realm of reasonability. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

You need to take note of risks, for example - Jiangsu Boamax Technologies GroupLtd has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.