Epoxy Base Electronic Material Corporation Limited's (SHSE:603002) 26% Jump Shows Its Popularity With Investors

Epoxy Base Electronic Material Corporation Limited (SHSE:603002) shares have continued their recent momentum with a 26% gain in the last month alone. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 4.0% in the last twelve months.

Following the firm bounce in price, given close to half the companies operating in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2.5x, you may consider Epoxy Base Electronic Material as a stock to potentially avoid with its 3.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for Epoxy Base Electronic Material

How Has Epoxy Base Electronic Material Performed Recently?

Epoxy Base Electronic Material could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Epoxy Base Electronic Material.

Do Revenue Forecasts Match The High P/S Ratio?

Epoxy Base Electronic Material's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 8.3%. This means it has also seen a slide in revenue over the longer-term as revenue is down 48% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 93% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 25%, which is noticeably less attractive.

In light of this, it's understandable that Epoxy Base Electronic Material's P/S sits above the majority of other companies. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Epoxy Base Electronic Material's P/S Mean For Investors?

Epoxy Base Electronic Material's P/S is on the rise since its shares have risen strongly. 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 look into Epoxy Base Electronic Material shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

You need to take note of risks, for example - Epoxy Base Electronic Material has 4 warning signs (and 2 which are potentially serious) we think you should know about.

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.