Investors Still Aren't Entirely Convinced By Shanghai HIUV New Materials Co.,Ltd's (SHSE:688680) Revenues Despite 35% Price Jump

Shanghai HIUV New Materials Co.,Ltd (SHSE:688680) shares have had a really impressive month, gaining 35% after a shaky period beforehand. But the last month did very little to improve the 54% share price decline over the last year.

Even after such a large jump in price, Shanghai HIUV New MaterialsLtd's price-to-sales (or "P/S") ratio of 0.7x 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. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Shanghai HIUV New MaterialsLtd

What Does Shanghai HIUV New MaterialsLtd's P/S Mean For Shareholders?

Shanghai HIUV New MaterialsLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Shanghai HIUV New MaterialsLtd will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Shanghai HIUV New MaterialsLtd?

The only time you'd be truly comfortable seeing a P/S as low as Shanghai HIUV New MaterialsLtd's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 19% decrease to the company's top line. Even so, admirably revenue has lifted 85% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 58% over the next year. With the industry only predicted to deliver 21%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Shanghai HIUV New MaterialsLtd is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Shanghai HIUV New MaterialsLtd's P/S Mean For Investors?

Despite Shanghai HIUV New MaterialsLtd'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.

To us, it seems Shanghai HIUV New MaterialsLtd currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

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

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.