What You Can Learn From Yunnan Shennong Agricultural Industry Group Co.,LTD.'s (SHSE:605296) P/S

When close to half the companies in the Food industry in China have price-to-sales ratios (or "P/S") below 1.8x, you may consider Yunnan Shennong Agricultural Industry Group Co.,LTD. (SHSE:605296) as a stock to potentially avoid with its 2.7x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Yunnan Shennong Agricultural Industry GroupLTD

How Has Yunnan Shennong Agricultural Industry GroupLTD Performed Recently?

Recent times have been advantageous for Yunnan Shennong Agricultural Industry GroupLTD as its revenues have been rising faster than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Yunnan Shennong Agricultural Industry GroupLTD's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Enough Revenue Growth Forecasted For Yunnan Shennong Agricultural Industry GroupLTD?

Yunnan Shennong Agricultural Industry GroupLTD's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 24% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 74% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 63% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

In light of this, it's understandable that Yunnan Shennong Agricultural Industry GroupLTD's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Yunnan Shennong Agricultural Industry GroupLTD's P/S

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.

Our look into Yunnan Shennong Agricultural Industry GroupLTD shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Yunnan Shennong Agricultural Industry GroupLTD you should know about.

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.