There's No Escaping Shandong Cynda Chemical Co.,Ltd.'s (SHSE:603086) Muted Revenues Despite A 36% Share Price Rise

Shandong Cynda Chemical Co.,Ltd. (SHSE:603086) shares have had a really impressive month, gaining 36% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 61%.

Although its price has surged higher, Shandong Cynda ChemicalLtd 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 2.3x and even P/S higher than 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Shandong Cynda ChemicalLtd

What Does Shandong Cynda ChemicalLtd's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Shandong Cynda ChemicalLtd's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Shandong Cynda ChemicalLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Shandong Cynda ChemicalLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Shandong Cynda ChemicalLtd would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 11% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 20% during the coming year according to the only analyst following the company. With the industry predicted to deliver 25% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why Shandong Cynda ChemicalLtd's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Shandong Cynda ChemicalLtd's P/S

The latest share price surge wasn't enough to lift Shandong Cynda ChemicalLtd's P/S close to the industry median. 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.

As expected, our analysis of Shandong Cynda ChemicalLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these 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 1 warning sign for Shandong Cynda ChemicalLtd you should know about.

If you're unsure about the strength of Shandong Cynda ChemicalLtd'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.