Ningbo Shanshan Co.,Ltd.'s (SHSE:600884) Shares Leap 32% Yet They're Still Not Telling The Full Story

Ningbo Shanshan Co.,Ltd. (SHSE:600884) shares have had a really impressive month, gaining 32% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

Even after such a large jump in price, Ningbo ShanshanLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.1x, considering almost half of all companies in the Chemicals industry in China have P/S ratios greater than 2x and even P/S higher than 4x 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.

View our latest analysis for Ningbo ShanshanLtd

How Ningbo ShanshanLtd Has Been Performing

While the industry has experienced revenue growth lately, Ningbo ShanshanLtd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on Ningbo ShanshanLtd will help you uncover what's on the horizon.

How Is Ningbo ShanshanLtd's Revenue Growth Trending?

Ningbo ShanshanLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.7%. 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 23% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next year should generate growth of 39% as estimated by the five analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 23%, which is noticeably less attractive.

In light of this, it's peculiar that Ningbo ShanshanLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Ningbo ShanshanLtd's P/S?

Despite Ningbo ShanshanLtd's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A look at Ningbo ShanshanLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Ningbo ShanshanLtd that you should be aware of.

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.