Miracll Chemicals Co.,Ltd (SZSE:300848) Stocks Shoot Up 41% But Its P/S Still Looks Reasonable

Miracll Chemicals Co.,Ltd (SZSE:300848) shares have had a really impressive month, gaining 41% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 6.0% isn't as attractive.

Following the firm bounce in price, when almost half of the companies in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2.2x, you may consider Miracll ChemicalsLtd as a stock not worth researching with its 4.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Miracll ChemicalsLtd

How Has Miracll ChemicalsLtd Performed Recently?

With revenue growth that's superior to most other companies of late, Miracll ChemicalsLtd has been doing relatively well. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.

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

How Is Miracll ChemicalsLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Miracll ChemicalsLtd would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The latest three year period has also seen an excellent 55% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 75% during the coming year according to the sole analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 21%, which is noticeably less attractive.

With this information, we can see why Miracll ChemicalsLtd is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Miracll ChemicalsLtd's P/S Mean For Investors?

The strong share price surge has lead to Miracll ChemicalsLtd's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Miracll ChemicalsLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Chemicals industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

It is also worth noting that we have found 3 warning signs for Miracll ChemicalsLtd (1 is a bit concerning!) that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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.