Investors Still Aren't Entirely Convinced By Suzhou Longjie Special Fiber Co., Ltd.'s (SHSE:603332) Revenues Despite 34% Price Jump

Suzhou Longjie Special Fiber Co., Ltd. (SHSE:603332) shares have continued their recent momentum with a 34% gain in the last month alone. Looking further back, the 15% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, Suzhou Longjie Special Fiber's price-to-sales (or "P/S") ratio of 1.3x might still make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 2.2x and even P/S above 5x are quite common. 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 Suzhou Longjie Special Fiber

What Does Suzhou Longjie Special Fiber's P/S Mean For Shareholders?

Recent times have been quite advantageous for Suzhou Longjie Special Fiber as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Suzhou Longjie Special Fiber will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Suzhou Longjie Special Fiber, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

Suzhou Longjie Special Fiber'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.

Retrospectively, the last year delivered an exceptional 50% gain to the company's top line. The latest three year period has also seen an excellent 82% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 23% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's peculiar that Suzhou Longjie Special Fiber's P/S sits below the majority of other companies. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

Despite Suzhou Longjie Special Fiber'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.

Our examination of Suzhou Longjie Special Fiber revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. While recent

There are also other vital risk factors to consider and we've discovered 3 warning signs for Suzhou Longjie Special Fiber (1 is a bit concerning!) that you should be aware of before investing here.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.