Why Investors Shouldn't Be Surprised By Jiangsu Boqian New Materials Stock Co., Ltd.'s (SHSE:605376) 25% Share Price Surge

Jiangsu Boqian New Materials Stock Co., Ltd. (SHSE:605376) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 32% over that time.

Since its price has surged higher, given around half the companies in China's Metals and Mining industry have price-to-sales ratios (or "P/S") below 1.4x, you may consider Jiangsu Boqian New Materials Stock as a stock to avoid entirely with its 7.8x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Jiangsu Boqian New Materials Stock

What Does Jiangsu Boqian New Materials Stock's Recent Performance Look Like?

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 that many are expecting the strong revenue performance to persist, which has raised the P/S. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jiangsu Boqian New Materials Stock.

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

The only time you'd be truly comfortable seeing a P/S as steep as Jiangsu Boqian New Materials Stock's is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 24%. Revenue has also lifted 15% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 107% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

With this in mind, it's not hard to understand why Jiangsu Boqian New Materials Stock's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

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

Jiangsu Boqian New Materials Stock's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

We've established that Jiangsu Boqian New Materials Stock maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Metals and Mining industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 2 warning signs for Jiangsu Boqian New Materials Stock you should be aware of, and 1 of them is significant.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.