Inner Mongolia Xingye Silver &Tin Mining Co.,Ltd's (SZSE:000426) P/S Still Appears To Be Reasonable

Inner Mongolia Xingye Silver &Tin Mining Co.,Ltd's (SZSE:000426) price-to-sales (or "P/S") ratio of 3.9x may look like a poor investment opportunity when you consider close to half the companies in the Metals and Mining industry in China have P/S ratios below 1.1x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Inner Mongolia Xingye Silver &Tin MiningLtd

What Does Inner Mongolia Xingye Silver &Tin MiningLtd's Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Inner Mongolia Xingye Silver &Tin MiningLtd has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Inner Mongolia Xingye Silver &Tin MiningLtd's 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 High P/S?

Inner Mongolia Xingye Silver &Tin MiningLtd's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered an exceptional 100% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 151% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 20% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

With this information, we can see why Inner Mongolia Xingye Silver &Tin MiningLtd is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Inner Mongolia Xingye Silver &Tin MiningLtd's P/S?

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.

As we suspected, our examination of Inner Mongolia Xingye Silver &Tin MiningLtd's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Inner Mongolia Xingye Silver &Tin MiningLtd with six simple checks on some of these key factors.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.