Fewer Investors Than Expected Jumping On Nantong Jiangshan Agrochemical & Chemicals Co.,Ltd. (SHSE:600389)

You may think that with a price-to-sales (or "P/S") ratio of 1.2x Nantong Jiangshan Agrochemical & Chemicals Co.,Ltd. (SHSE:600389) is a stock worth checking out, seeing as almost half of all the Chemicals companies in China have P/S ratios greater than 2x and even P/S higher than 5x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Nantong Jiangshan Agrochemical & ChemicalsLtd

How Has Nantong Jiangshan Agrochemical & ChemicalsLtd Performed Recently?

Nantong Jiangshan Agrochemical & ChemicalsLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Nantong Jiangshan Agrochemical & ChemicalsLtd will help you uncover what's on the horizon.

How Is Nantong Jiangshan Agrochemical & ChemicalsLtd's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Nantong Jiangshan Agrochemical & ChemicalsLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 45% decrease to the company's top line. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 32% over the next year. With the industry only predicted to deliver 20%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Nantong Jiangshan Agrochemical & ChemicalsLtd is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Nantong Jiangshan Agrochemical & ChemicalsLtd's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Nantong Jiangshan Agrochemical & ChemicalsLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

You always need to take note of risks, for example - Nantong Jiangshan Agrochemical & ChemicalsLtd has 2 warning signs we think you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.