Zhejiang Yiming Food Co., Ltd.'s (SHSE:605179) Popularity With Investors Is Clear

With a median price-to-sales (or "P/S") ratio of close to 1.8x in the Food industry in China, you could be forgiven for feeling indifferent about Zhejiang Yiming Food Co., Ltd.'s (SHSE:605179) P/S ratio of 1.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Zhejiang Yiming Food

How Zhejiang Yiming Food Has Been Performing

With revenue growth that's inferior to most other companies of late, Zhejiang Yiming Food has been relatively sluggish. It might be that many expect the uninspiring revenue performance to strengthen positively, which has kept the P/S ratio 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 Zhejiang Yiming Food will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Zhejiang Yiming Food?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Zhejiang Yiming Food's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.9% last year. Pleasingly, revenue has also lifted 32% 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.

Turning to the outlook, the next year should generate growth of 14% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to expand by 16%, which is not materially different.

With this in mind, it makes sense that Zhejiang Yiming Food's P/S is closely matching its industry peers. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

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.

We've seen that Zhejiang Yiming Food maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Zhejiang Yiming Food with six simple checks will allow you to discover any risks that could be an issue.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.