Investors Appear Satisfied With Jiangsu Boqian New Materials Stock Co., Ltd.'s (SHSE:605376) Prospects

When you see that almost half of the companies in the Metals and Mining industry in China have price-to-sales ratios (or "P/S") below 1.3x, Jiangsu Boqian New Materials Stock Co., Ltd. (SHSE:605376) looks to be giving off strong sell signals with its 7.9x 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 so lofty.

Check out our latest analysis for Jiangsu Boqian New Materials Stock

What Does Jiangsu Boqian New Materials Stock's P/S Mean For Shareholders?

Jiangsu Boqian New Materials Stock certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Jiangsu Boqian New Materials Stock will help you uncover what's on the horizon.

How Is Jiangsu Boqian New Materials Stock's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Jiangsu Boqian New Materials Stock's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 50% gain to the company's top line. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 23% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 14%, which is noticeably less attractive.

With this information, we can see why Jiangsu Boqian New Materials Stock is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Key Takeaway

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Jiangsu Boqian New Materials Stock shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

You always need to take note of risks, for example - Jiangsu Boqian New Materials Stock has 2 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.