There's No Escaping Shantou Wanshun New Material Group Co., Ltd.'s (SZSE:300057) Muted Revenues Despite A 30% Share Price Rise

Despite an already strong run, Shantou Wanshun New Material Group Co., Ltd. (SZSE:300057) shares have been powering on, with a gain of 30% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 5.6% over the last year.

Although its price has surged higher, given about half the companies operating in China's Packaging industry have price-to-sales ratios (or "P/S") above 2.1x, you may still consider Shantou Wanshun New Material Group as an attractive investment with its 0.9x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Shantou Wanshun New Material Group

What Does Shantou Wanshun New Material Group's Recent Performance Look Like?

The revenue growth achieved at Shantou Wanshun New Material Group over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you 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.

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 Shantou Wanshun New Material Group's earnings, revenue and cash flow.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Shantou Wanshun New Material Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 16% gain to the company's top line. The latest three year period has also seen a 13% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 15% shows it's noticeably less attractive.

With this information, we can see why Shantou Wanshun New Material Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Shantou Wanshun New Material Group's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Shantou Wanshun New Material Group's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Shantou Wanshun New Material Group revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Shantou Wanshun New Material Group (at least 1 which can't be ignored), and understanding them should be part of your investment process.

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.