Anhui Anli Material Technology Co., Ltd.'s (SZSE:300218) Shares Leap 39% Yet They're Still Not Telling The Full Story

Those holding Anhui Anli Material Technology Co., Ltd. (SZSE:300218) shares would be relieved that the share price has rebounded 39% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Taking a wider view, although not as strong as the last month, the full year gain of 19% is also fairly reasonable.

Even after such a large jump in price, there still wouldn't be many who think Anhui Anli Material Technology's price-to-sales (or "P/S") ratio of 1.4x is worth a mention when the median P/S in China's Luxury industry is similar at about 1.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Anhui Anli Material Technology

How Has Anhui Anli Material Technology Performed Recently?

Anhui Anli Material Technology has been struggling lately as its revenue has declined faster than most other companies. Perhaps the market is expecting future revenue performance to begin matching the rest of the industry, which has kept the P/S from declining. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

Keen to find out how analysts think Anhui Anli Material Technology's future stacks up against the industry? In that case, our free report is a great place to start.

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

Anhui Anli Material Technology's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 9.0% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 24% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next year should generate growth of 31% as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 20% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Anhui Anli Material Technology's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does Anhui Anli Material Technology's P/S Mean For Investors?

Its shares have lifted substantially and now Anhui Anli Material Technology's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Anhui Anli Material Technology currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Anhui Anli Material Technology you should know about.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.