Investors Still Aren't Entirely Convinced By Jiangsu Canlon Building Materials Co., Ltd.'s (SZSE:300715) Revenues Despite 26% Price Jump

Jiangsu Canlon Building Materials Co., Ltd. (SZSE:300715) shareholders have had their patience rewarded with a 26% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

Although its price has surged higher, Jiangsu Canlon Building Materials' price-to-sales (or "P/S") ratio of 1.4x might still make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 2.2x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Jiangsu Canlon Building Materials

What Does Jiangsu Canlon Building Materials' Recent Performance Look Like?

Jiangsu Canlon Building Materials hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still 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.

Keen to find out how analysts think Jiangsu Canlon Building Materials' future stacks up against the industry? In that case, our free report is a great place to start.

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

The only time you'd be truly comfortable seeing a P/S as low as Jiangsu Canlon Building Materials' is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 5.3% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 3.8% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 27% over the next year. With the industry predicted to deliver 25% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Jiangsu Canlon Building Materials is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

Jiangsu Canlon Building Materials' stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It looks to us like the P/S figures for Jiangsu Canlon Building Materials remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Before you settle on your opinion, we've discovered 2 warning signs for Jiangsu Canlon Building Materials that you should be aware of.

If you're unsure about the strength of Jiangsu Canlon Building Materials' 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.