Jiangsu Yawei Machine Tool Co., Ltd.'s (SZSE:002559) P/S Is Still On The Mark Following 36% Share Price Bounce

The Jiangsu Yawei Machine Tool Co., Ltd. (SZSE:002559) share price has done very well over the last month, posting an excellent gain of 36%. Looking further back, the 12% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Jiangsu Yawei Machine Tool's P/S ratio of 3.8x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in China is also close to 3.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Jiangsu Yawei Machine Tool

What Does Jiangsu Yawei Machine Tool's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Jiangsu Yawei Machine Tool has been relatively sluggish. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Jiangsu Yawei Machine Tool will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Jiangsu Yawei Machine Tool?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Jiangsu Yawei Machine Tool's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 4.1%. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 2.9% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 25% during the coming year according to the lone analyst following the company. With the industry predicted to deliver 23% growth , the company is positioned for a comparable revenue result.

With this information, we can see why Jiangsu Yawei Machine Tool is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Jiangsu Yawei Machine Tool's P/S?

Jiangsu Yawei Machine Tool appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've seen that Jiangsu Yawei Machine Tool maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Jiangsu Yawei Machine Tool that you need to be mindful of.

If you're unsure about the strength of Jiangsu Yawei Machine Tool's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.