Guangdong Orient Zirconic Ind Sci & Tech Co.,Ltd (SZSE:002167) Looks Just Right With A 26% Price Jump

Guangdong Orient Zirconic Ind Sci & Tech Co.,Ltd (SZSE:002167) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 17% over that time.

Following the firm bounce in price, when almost half of the companies in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2.1x, you may consider Guangdong Orient Zirconic Ind Sci & TechLtd as a stock probably not worth researching with its 3.4x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Guangdong Orient Zirconic Ind Sci & TechLtd

How Has Guangdong Orient Zirconic Ind Sci & TechLtd Performed Recently?

Guangdong Orient Zirconic Ind Sci & TechLtd has been doing a decent job lately as it's been growing revenue at a reasonable pace. One possibility is that the P/S ratio is high because investors think this good revenue growth will be enough to outperform the broader industry in the near future. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Guangdong Orient Zirconic Ind Sci & TechLtd's earnings, revenue and cash flow.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Guangdong Orient Zirconic Ind Sci & TechLtd's is when the company's growth is on track to outshine the industry.

Retrospectively, the last year delivered a decent 7.2% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 116% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 23% shows it's noticeably more attractive.

In light of this, it's understandable that Guangdong Orient Zirconic Ind Sci & TechLtd's P/S sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What We Can Learn From Guangdong Orient Zirconic Ind Sci & TechLtd's P/S?

The large bounce in Guangdong Orient Zirconic Ind Sci & TechLtd's shares has lifted the company's P/S handsomely. 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.

It's no surprise that Guangdong Orient Zirconic Ind Sci & TechLtd can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Guangdong Orient Zirconic Ind Sci & TechLtd with six simple checks.

If these risks are making you reconsider your opinion on Guangdong Orient Zirconic Ind Sci & TechLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.