Further Upside For Chenzhou City Jingui Silver Industry Co., Ltd. (SZSE:002716) Shares Could Introduce Price Risks After 30% Bounce

Chenzhou City Jingui Silver Industry Co., Ltd. (SZSE:002716) shares have had a really impressive month, gaining 30% after a shaky period beforehand. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 7.2% in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that Chenzhou City Jingui Silver Industry's price-to-sales (or "P/S") ratio of 1.7x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in China, where the median P/S ratio is around 1.3x. 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.

Check out our latest analysis for Chenzhou City Jingui Silver Industry

How Chenzhou City Jingui Silver Industry Has Been Performing

Chenzhou City Jingui Silver Industry certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Chenzhou City Jingui Silver Industry will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Chenzhou City Jingui Silver Industry, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Chenzhou City Jingui Silver Industry's Revenue Growth Trending?

In order to justify its P/S ratio, Chenzhou City Jingui Silver Industry would need to produce growth that's similar to the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 50%. The strong recent performance means it was also able to grow revenue by 174% 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 15% shows it's noticeably more attractive.

In light of this, it's curious that Chenzhou City Jingui Silver Industry's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

What We Can Learn From Chenzhou City Jingui Silver Industry's P/S?

Chenzhou City Jingui Silver Industry's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Chenzhou City Jingui Silver Industry currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Chenzhou City Jingui Silver Industry, and understanding should be part of your investment process.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.