Jiangsu Apon Medical Technology Co., Ltd.'s (SZSE:300753) Share Price Boosted 41% But Its Business Prospects Need A Lift Too

Those holding Jiangsu Apon Medical Technology Co., Ltd. (SZSE:300753) shares would be relieved that the share price has rebounded 41% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 23% in the last twelve months.

Although its price has surged higher, Jiangsu Apon Medical Technology's price-to-sales (or "P/S") ratio of 3.8x might still make it look like a buy right now compared to the Medical Equipment industry in China, where around half of the companies have P/S ratios above 5.6x and even P/S above 9x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Jiangsu Apon Medical Technology

What Does Jiangsu Apon Medical Technology's Recent Performance Look Like?

Jiangsu Apon Medical Technology has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Jiangsu Apon Medical Technology will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Jiangsu Apon Medical Technology, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Jiangsu Apon Medical Technology's Revenue Growth Trending?

In order to justify its P/S ratio, Jiangsu Apon Medical Technology would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 15% gain to the company's top line. The latest three year period has also seen a 12% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 26% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Jiangsu Apon Medical Technology is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Jiangsu Apon Medical Technology's P/S

Despite Jiangsu Apon Medical Technology's share price climbing recently, its P/S still lags most other companies. 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.

Our examination of Jiangsu Apon Medical Technology confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Jiangsu Apon Medical Technology (of which 1 doesn't sit too well with us!) you should know about.

If you're unsure about the strength of Jiangsu Apon Medical Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.