Zhejiang Jiaao Enprotech Stock Co., Ltd (SHSE:603822) Stock Rockets 31% As Investors Are Less Pessimistic Than Expected

Zhejiang Jiaao Enprotech Stock Co., Ltd (SHSE:603822) shares have continued their recent momentum with a 31% gain in the last month alone. The last 30 days bring the annual gain to a very sharp 88%.

Even after such a large jump in price, there still wouldn't be many who think Zhejiang Jiaao Enprotech Stock's price-to-sales (or "P/S") ratio of 2.6x is worth a mention when the median P/S in China's Chemicals industry is similar at about 2.4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Zhejiang Jiaao Enprotech Stock

How Has Zhejiang Jiaao Enprotech Stock Performed Recently?

For instance, Zhejiang Jiaao Enprotech Stock's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Zhejiang Jiaao Enprotech Stock will help you shine a light on its historical performance.

How Is Zhejiang Jiaao Enprotech Stock's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Zhejiang Jiaao Enprotech Stock's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 51%. As a result, revenue from three years ago have also fallen 7.0% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 25% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this in mind, we find it worrying that Zhejiang Jiaao Enprotech Stock's P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does Zhejiang Jiaao Enprotech Stock's P/S Mean For Investors?

Its shares have lifted substantially and now Zhejiang Jiaao Enprotech Stock's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We find it unexpected that Zhejiang Jiaao Enprotech Stock trades at a P/S ratio that is comparable to the rest of the industry, despite experiencing declining revenues during the medium-term, while the industry as a whole is expected to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Zhejiang Jiaao Enprotech Stock that you should be aware of.

If these risks are making you reconsider your opinion on Zhejiang Jiaao Enprotech Stock, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.