There's Reason For Concern Over Shanghai Yaohua Pilkington Glass Group Co., Ltd.'s (SHSE:600819) Massive 42% Price Jump

Those holding Shanghai Yaohua Pilkington Glass Group Co., Ltd. (SHSE:600819) shares would be relieved that the share price has rebounded 42% 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 24% in the last twelve months.

In spite of the firm bounce in price, there still wouldn't be many who think Shanghai Yaohua Pilkington Glass Group's price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S in China's Basic Materials industry is similar at about 1.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Shanghai Yaohua Pilkington Glass Group

How Shanghai Yaohua Pilkington Glass Group Has Been Performing

Revenue has risen firmly for Shanghai Yaohua Pilkington Glass Group recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Shanghai Yaohua Pilkington Glass Group's earnings, revenue and cash flow.

How Is Shanghai Yaohua Pilkington Glass Group's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Shanghai Yaohua Pilkington Glass Group's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. The latest three year period has also seen a 29% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 20% shows it's noticeably less attractive.

With this in mind, we find it intriguing that Shanghai Yaohua Pilkington Glass Group's P/S is comparable to that of its industry peers. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Key Takeaway

Shanghai Yaohua Pilkington Glass Group's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 Shanghai Yaohua Pilkington Glass Group's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

You always need to take note of risks, for example - Shanghai Yaohua Pilkington Glass Group has 2 warning signs we think you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.