Jiangxi Haiyuan Composites Technology Co.,Ltd.'s (SZSE:002529) Stock Retreats 32% But Revenues Haven't Escaped The Attention Of Investors

Unfortunately for some shareholders, the Jiangxi Haiyuan Composites Technology Co.,Ltd. (SZSE:002529) share price has dived 32% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 57% share price decline.

Although its price has dipped substantially, you could still be forgiven for thinking Jiangxi Haiyuan Composites TechnologyLtd is a stock not worth researching with a price-to-sales ratios (or "P/S") of 4.2x, considering almost half the companies in China's Machinery industry have P/S ratios below 2.6x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Jiangxi Haiyuan Composites TechnologyLtd

How Jiangxi Haiyuan Composites TechnologyLtd Has Been Performing

Jiangxi Haiyuan Composites TechnologyLtd has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jiangxi Haiyuan Composites TechnologyLtd will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Jiangxi Haiyuan Composites TechnologyLtd?

The only time you'd be truly comfortable seeing a P/S as high as Jiangxi Haiyuan Composites TechnologyLtd's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. Pleasingly, revenue has also lifted 152% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 24% shows it's noticeably more attractive.

In light of this, it's understandable that Jiangxi Haiyuan Composites TechnologyLtd's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Final Word

There's still some elevation in Jiangxi Haiyuan Composites TechnologyLtd's P/S, even if the same can't be said for its share price recently. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Jiangxi Haiyuan Composites TechnologyLtd revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Jiangxi Haiyuan Composites TechnologyLtd that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.