There's Reason For Concern Over Gifore Agricultural Science & Technology Service Co.,Ltd's (SZSE:300022) Massive 30% Price Jump

Those holding Gifore Agricultural Science & Technology Service Co.,Ltd (SZSE:300022) shares would be relieved that the share price has rebounded 30% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Gifore Agricultural Science & Technology ServiceLtd's P/S ratio of 0.8x, since the median price-to-sales (or "P/S") ratio for the Trade Distributors industry in China is also close to 0.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Gifore Agricultural Science & Technology ServiceLtd

What Does Gifore Agricultural Science & Technology ServiceLtd's Recent Performance Look Like?

Revenue has risen firmly for Gifore Agricultural Science & Technology ServiceLtd recently, which is pleasing to see. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Gifore Agricultural Science & Technology ServiceLtd will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The P/S?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Gifore Agricultural Science & Technology ServiceLtd's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The solid recent performance means it was also able to grow revenue by 18% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 17% shows it's noticeably less attractive.

In light of this, it's curious that Gifore Agricultural Science & Technology ServiceLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On Gifore Agricultural Science & Technology ServiceLtd's P/S

Its shares have lifted substantially and now Gifore Agricultural Science & Technology ServiceLtd's P/S is back within range of the industry median. 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.

We've established that Gifore Agricultural Science & Technology ServiceLtd's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Gifore Agricultural Science & Technology ServiceLtd you should know about.

If you're unsure about the strength of Gifore Agricultural Science & Technology ServiceLtd'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.