Optimistic Investors Push Tianjin Jiuri New Materials Co., Ltd. (SHSE:688199) Shares Up 46% But Growth Is Lacking

Tianjin Jiuri New Materials Co., Ltd. (SHSE:688199) shareholders have had their patience rewarded with a 46% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 13% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Tianjin Jiuri New Materials' P/S ratio of 1.9x, since the median price-to-sales (or "P/S") ratio for the Chemicals industry in China is also close to 2.2x. 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 Tianjin Jiuri New Materials

What Does Tianjin Jiuri New Materials' Recent Performance Look Like?

Tianjin Jiuri New Materials certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Tianjin Jiuri New Materials' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

Tianjin Jiuri New Materials' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 24%. The latest three year period has also seen a 24% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 1.5% as estimated by the lone analyst watching the company. Meanwhile, the broader industry is forecast to expand by 21%, which paints a poor picture.

In light of this, it's somewhat alarming that Tianjin Jiuri New Materials' P/S sits in line with the majority of other companies. Apparently many investors in the company reject the analyst cohort's pessimism and aren't willing to let go of their stock right now. Only the boldest would assume these prices are sustainable as these declining revenues are likely to weigh on the share price eventually.

What We Can Learn From Tianjin Jiuri New Materials' P/S?

Tianjin Jiuri New Materials' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our check of Tianjin Jiuri New Materials' analyst forecasts revealed that its outlook for shrinking revenue isn't bringing down its P/S as much as we would have predicted. When we see a gloomy outlook like this, our immediate thoughts are that the share price is at risk of declining, negatively impacting P/S. If the declining revenues were to materialize in the form of a declining share price, shareholders will be feeling the pinch.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Tianjin Jiuri New Materials with six simple checks will allow you to discover any risks that could be an issue.

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.