Juneyao Grand Healthy DrinksCo.,Ltd. (SHSE:605388) Looks Just Right With A 36% Price Jump

Despite an already strong run, Juneyao Grand Healthy DrinksCo.,Ltd. (SHSE:605388) shares have been powering on, with a gain of 36% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 22% over that time.

Since its price has surged higher, you could be forgiven for thinking Juneyao Grand Healthy DrinksCo.Ltd is a stock not worth researching with a price-to-sales ratios (or "P/S") of 3.1x, considering almost half the companies in China's Food industry have P/S ratios below 1.9x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Juneyao Grand Healthy DrinksCo.Ltd

How Has Juneyao Grand Healthy DrinksCo.Ltd Performed Recently?

For instance, Juneyao Grand Healthy DrinksCo.Ltd's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Juneyao Grand Healthy DrinksCo.Ltd will help you shine a light on its historical performance.

How Is Juneyao Grand Healthy DrinksCo.Ltd's Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Juneyao Grand Healthy DrinksCo.Ltd's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 13%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 73% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 16% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Juneyao Grand Healthy DrinksCo.Ltd's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Bottom Line On Juneyao Grand Healthy DrinksCo.Ltd's P/S

Juneyao Grand Healthy DrinksCo.Ltd's P/S is on the rise since its shares have risen strongly. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Juneyao Grand Healthy DrinksCo.Ltd maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Unless the recent medium-term 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 4 warning signs for Juneyao Grand Healthy DrinksCo.Ltd (of which 2 are a bit concerning!) 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.