Little Excitement Around Jiangsu Sanfame Polyester Material Co.,Ltd.'s (SHSE:600370) Revenues As Shares Take 27% Pounding

The Jiangsu Sanfame Polyester Material Co.,Ltd. (SHSE:600370) share price has fared very poorly over the last month, falling by a substantial 27%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 47% share price drop.

After such a large drop in price, when close to half the companies operating in China's Luxury industry have price-to-sales ratios (or "P/S") above 1.5x, you may consider Jiangsu Sanfame Polyester MaterialLtd as an enticing stock to check out with its 0.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Jiangsu Sanfame Polyester MaterialLtd

What Does Jiangsu Sanfame Polyester MaterialLtd's P/S Mean For Shareholders?

Revenue has risen at a steady rate over the last year for Jiangsu Sanfame Polyester MaterialLtd, which is generally not a bad outcome. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. Those who are bullish on Jiangsu Sanfame Polyester MaterialLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Jiangsu Sanfame Polyester MaterialLtd's earnings, revenue and cash flow.

How Is Jiangsu Sanfame Polyester MaterialLtd's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Jiangsu Sanfame Polyester MaterialLtd's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 6.6% last year. This was backed up an excellent period prior to see revenue up by 47% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

This is in contrast to the rest of the industry, which is expected to grow by 17% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Jiangsu Sanfame Polyester MaterialLtd's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Jiangsu Sanfame Polyester MaterialLtd's P/S Mean For Investors?

Jiangsu Sanfame Polyester MaterialLtd's recently weak share price has pulled its P/S back below other Luxury companies. 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.

In line with expectations, Jiangsu Sanfame Polyester MaterialLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Jiangsu Sanfame Polyester MaterialLtd, and understanding them should be part of your investment process.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.