Shandong Minhe Animal Husbandry Co., Ltd.'s (SZSE:002234) Shares Leap 29% Yet They're Still Not Telling The Full Story

Shandong Minhe Animal Husbandry Co., Ltd. (SZSE:002234) shares have continued their recent momentum with a 29% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 16% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Shandong Minhe Animal Husbandry's price-to-sales (or "P/S") ratio of 1.9x is worth a mention when the median P/S in China's Food industry is similar at about 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.

Check out our latest analysis for Shandong Minhe Animal Husbandry

How Shandong Minhe Animal Husbandry Has Been Performing

Shandong Minhe Animal Husbandry hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

Keen to find out how analysts think Shandong Minhe Animal Husbandry's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Shandong Minhe Animal Husbandry?

Shandong Minhe Animal Husbandry'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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.4%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 9.5% in total. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 45% over the next year. That's shaping up to be materially higher than the 16% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Shandong Minhe Animal Husbandry's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Bottom Line On Shandong Minhe Animal Husbandry's P/S

Its shares have lifted substantially and now Shandong Minhe Animal Husbandry's P/S is back within range of the industry median. 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 Shandong Minhe Animal Husbandry 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Shandong Minhe Animal Husbandry with six simple checks on some of these key factors.

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.