Jiangsu Lihua Foods Group Co., Ltd (SZSE:300761) Might Not Be As Mispriced As It Looks

Jiangsu Lihua Foods Group Co., Ltd's (SZSE:300761) price-to-sales (or "P/S") ratio of 0.9x might make it look like a buy right now compared to the Food industry in China, where around half of the companies have P/S ratios above 1.8x and even P/S above 4x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for Jiangsu Lihua Foods Group

How Jiangsu Lihua Foods Group Has Been Performing

Jiangsu Lihua Foods Group certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jiangsu Lihua Foods Group.

Is There Any Revenue Growth Forecasted For Jiangsu Lihua Foods Group?

In order to justify its P/S ratio, Jiangsu Lihua Foods Group would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.0% last year. This was backed up an excellent period prior to see revenue up by 57% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the five analysts covering the company suggest revenue should grow by 11% over the next year. With the industry predicted to deliver 11% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Jiangsu Lihua Foods Group's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What Does Jiangsu Lihua Foods Group's P/S Mean For Investors?

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.

It looks to us like the P/S figures for Jiangsu Lihua Foods Group remain low despite growth that is expected to be in line with other companies in the industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

You should always think about risks. Case in point, we've spotted 1 warning sign for Jiangsu Lihua Foods Group you should be aware of.

If these risks are making you reconsider your opinion on Jiangsu Lihua Foods Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.