Tianyang New Materials (Shanghai) Technology Co., Ltd.'s (SHSE:603330) Shares Leap 26% Yet They're Still Not Telling The Full Story

Those holding Tianyang New Materials (Shanghai) Technology Co., Ltd. (SHSE:603330) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. But the last month did very little to improve the 51% share price decline over the last year.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Tianyang New Materials (Shanghai) Technology's P/S ratio of 2x, since the median price-to-sales (or "P/S") ratio for the Chemicals industry in China is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Tianyang New Materials (Shanghai) Technology

What Does Tianyang New Materials (Shanghai) Technology's Recent Performance Look Like?

Tianyang New Materials (Shanghai) Technology hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Tianyang New Materials (Shanghai) Technology will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Tianyang New Materials (Shanghai) Technology?

In order to justify its P/S ratio, Tianyang New Materials (Shanghai) Technology would need to produce growth that's similar to 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 3.5%. Even so, admirably revenue has lifted 114% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 104% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 25%, which is noticeably less attractive.

With this information, we find it interesting that Tianyang New Materials (Shanghai) Technology is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Tianyang New Materials (Shanghai) Technology's P/S

Its shares have lifted substantially and now Tianyang New Materials (Shanghai) Technology's P/S is back within range of the industry median. 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.

Looking at Tianyang New Materials (Shanghai) Technology's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Tianyang New Materials (Shanghai) Technology with six simple checks on some of these key factors.

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.