A Piece Of The Puzzle Missing From M-Grass Ecology And Environment (Group) Co., Ltd.'s (SZSE:300355) 38% Share Price Climb

M-Grass Ecology And Environment (Group) Co., Ltd. (SZSE:300355) shareholders have had their patience rewarded with a 38% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 21% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think M-Grass Ecology And Environment (Group)'s price-to-sales (or "P/S") ratio of 2.7x is worth a mention when it essentially matches the median P/S in China's Commercial Services industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for M-Grass Ecology And Environment (Group)

How Has M-Grass Ecology And Environment (Group) Performed Recently?

M-Grass Ecology And Environment (Group) could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on M-Grass Ecology And Environment (Group) will help you uncover what's on the horizon.

How Is M-Grass Ecology And Environment (Group)'s Revenue Growth Trending?

In order to justify its P/S ratio, M-Grass Ecology And Environment (Group) would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.3%. This means it has also seen a slide in revenue over the longer-term as revenue is down 28% 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.

Turning to the outlook, the next year should generate growth of 64% as estimated by the lone analyst watching the company. With the industry only predicted to deliver 28%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that M-Grass Ecology And Environment (Group)'s P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now M-Grass Ecology And Environment (Group)'s P/S is back within range of the industry median. 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.

Looking at M-Grass Ecology And Environment (Group)'s analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware M-Grass Ecology And Environment (Group) is showing 4 warning signs in our investment analysis, and 1 of those is concerning.

If these risks are making you reconsider your opinion on M-Grass Ecology And Environment (Group), explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.