Yinbang Clad Material Co.,Ltd's (SZSE:300337) 25% Jump Shows Its Popularity With Investors

Yinbang Clad Material Co.,Ltd (SZSE:300337) shares have had a really impressive month, gaining 25% after a shaky period beforehand. The annual gain comes to 106% following the latest surge, making investors sit up and take notice.

After such a large jump in price, when almost half of the companies in China's Metals and Mining industry have price-to-sales ratios (or "P/S") below 1.4x, you may consider Yinbang Clad MaterialLtd as a stock probably not worth researching with its 2.3x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

See our latest analysis for Yinbang Clad MaterialLtd

How Has Yinbang Clad MaterialLtd Performed Recently?

The revenue growth achieved at Yinbang Clad MaterialLtd over the last year would be more than acceptable for most companies. Perhaps the market is expecting this decent revenue performance to beat out the industry over the near term, which has kept the P/S propped up. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Yinbang Clad MaterialLtd, take a look at this free data-rich visualisation to see how the company stacks up on 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 Yinbang Clad MaterialLtd's is when the company's growth is on track to outshine the industry.

Taking a look back first, we see that the company grew revenue by an impressive 15% last year. The strong recent performance means it was also able to grow revenue by 71% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 14% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Yinbang Clad MaterialLtd's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What We Can Learn From Yinbang Clad MaterialLtd's P/S?

Yinbang Clad MaterialLtd shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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 Yinbang Clad MaterialLtd revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. If recent medium-term revenue trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Yinbang Clad MaterialLtd.

If these risks are making you reconsider your opinion on Yinbang Clad MaterialLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.