What Crystal Clear Electronic Material Co.,Ltd's (SZSE:300655) 33% Share Price Gain Is Not Telling You

Crystal Clear Electronic Material Co.,Ltd (SZSE:300655) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Since its price has surged higher, given around half the companies in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2.2x, you may consider Crystal Clear Electronic MaterialLtd as a stock to avoid entirely with its 6.7x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Crystal Clear Electronic MaterialLtd

What Does Crystal Clear Electronic MaterialLtd's Recent Performance Look Like?

Crystal Clear Electronic MaterialLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Crystal Clear Electronic MaterialLtd will help you uncover what's on the horizon.

How Is Crystal Clear Electronic MaterialLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Crystal Clear Electronic MaterialLtd's is when the company's growth is on track to outshine the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 4.6%. This means it has also seen a slide in revenue over the longer-term as revenue is down 6.3% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 23% as estimated by the four analysts watching the company. With the industry predicted to deliver 22% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Crystal Clear Electronic MaterialLtd's P/S is higher than its industry peers. Apparently many investors in the company are more bullish than analysts indicate and aren't willing to let go of their stock right now. Although, additional gains will be difficult to achieve as this level of revenue growth is likely to weigh down the share price eventually.

The Final Word

Shares in Crystal Clear Electronic MaterialLtd have seen a strong upwards swing lately, which has really helped boost its P/S figure. 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.

Analysts are forecasting Crystal Clear Electronic MaterialLtd's revenues to only grow on par with the rest of the industry, which has lead to the high P/S ratio being unexpected. The fact that the revenue figures aren't setting the world alight has us doubtful that the company's elevated P/S can be sustainable for the long term. Unless the company can jump ahead of the rest of the industry in the short-term, it'll be a challenge to maintain the share price at current levels.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Crystal Clear Electronic MaterialLtd you should know about.

If you're unsure about the strength of Crystal Clear Electronic MaterialLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.