A Piece Of The Puzzle Missing From Longyan Zhuoyue New Energy Co., Ltd.'s (SHSE:688196) 27% Share Price Climb

Despite an already strong run, Longyan Zhuoyue New Energy Co., Ltd. (SHSE:688196) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 60% in the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Longyan Zhuoyue New Energy's P/S ratio of 1.5x, since the median price-to-sales (or "P/S") ratio for the Oil and Gas industry in China is also close to 1.2x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Longyan Zhuoyue New Energy

What Does Longyan Zhuoyue New Energy's P/S Mean For Shareholders?

With only a limited decrease in revenue compared to most other companies of late, Longyan Zhuoyue New Energy has been doing relatively well. It might be that many expect the comparatively superior revenue performance to vanish, which has kept the P/S from rising. You'd much rather the company continue improving its revenue if you still believe in the business. In saying that, existing shareholders probably aren't too pessimistic about the share price if the company's revenue continues outplaying the industry.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Longyan Zhuoyue New Energy.

Is There Some Revenue Growth Forecasted For Longyan Zhuoyue New Energy?

The only time you'd be comfortable seeing a P/S like Longyan Zhuoyue New Energy's is when the company's growth is tracking the industry closely.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 37% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been great for the company, but investors will want to ask why it has slowed to such an extent.

Looking ahead now, revenue is anticipated to climb by 31% during the coming year according to the four analysts following the company. That's shaping up to be materially higher than the 5.9% growth forecast for the broader industry.

With this information, we find it interesting that Longyan Zhuoyue New Energy is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Longyan Zhuoyue New Energy's P/S

Longyan Zhuoyue New Energy's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Looking at Longyan Zhuoyue New Energy'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.

Plus, you should also learn about these 4 warning signs we've spotted with Longyan Zhuoyue New Energy (including 3 which are a bit unpleasant).

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.