The Market Lifts Jiangsu Sanfame Polyester Material Co.,Ltd. (SHSE:600370) Shares 28% But It Can Do More

Jiangsu Sanfame Polyester Material Co.,Ltd. (SHSE:600370) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 41% in the last twelve months.

Even after such a large jump in price, considering around half the companies operating in China's Luxury industry have price-to-sales ratios (or "P/S") above 1.4x, you may still consider Jiangsu Sanfame Polyester MaterialLtd as an solid investment opportunity 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.

View our latest analysis for Jiangsu Sanfame Polyester MaterialLtd

How Has Jiangsu Sanfame Polyester MaterialLtd Performed Recently?

Revenue has risen at a steady rate over the last year for Jiangsu Sanfame Polyester MaterialLtd, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Although there are no analyst estimates available for Jiangsu Sanfame Polyester MaterialLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Jiangsu Sanfame Polyester MaterialLtd?

In order to justify its P/S ratio, Jiangsu Sanfame Polyester MaterialLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a decent 5.8% gain to the company's revenues. Pleasingly, revenue has also lifted 43% 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.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 14% shows it's about the same on an annualised basis.

In light of this, it's peculiar that Jiangsu Sanfame Polyester MaterialLtd's P/S sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Bottom Line On Jiangsu Sanfame Polyester MaterialLtd's P/S

The latest share price surge wasn't enough to lift Jiangsu Sanfame Polyester MaterialLtd's P/S close to the industry median. 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.

The fact that Jiangsu Sanfame Polyester MaterialLtd currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Jiangsu Sanfame Polyester MaterialLtd you should know about.

If you're unsure about the strength of Jiangsu Sanfame Polyester MaterialLtd'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.