Shanxi Meijin Energy Co.,Ltd.'s (SZSE:000723) Subdued P/S Might Signal An Opportunity

With a median price-to-sales (or "P/S") ratio of close to 1.1x in the Metals and Mining industry in China, you could be forgiven for feeling indifferent about Shanxi Meijin Energy Co.,Ltd.'s (SZSE:000723) P/S ratio of 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Shanxi Meijin EnergyLtd

What Does Shanxi Meijin EnergyLtd's Recent Performance Look Like?

Shanxi Meijin EnergyLtd hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Keen to find out how analysts think Shanxi Meijin EnergyLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Shanxi Meijin EnergyLtd?

In order to justify its P/S ratio, Shanxi Meijin EnergyLtd would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 37% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 16% as estimated by the sole analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 13%, which is noticeably less attractive.

In light of this, it's curious that Shanxi Meijin EnergyLtd's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite enticing revenue growth figures that outpace the industry, Shanxi Meijin EnergyLtd's P/S isn't quite what we'd expect. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Shanxi Meijin EnergyLtd with six simple checks.

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.