Stock Analysis

Miracll Chemicals Co.,Ltd's (SZSE:300848) 26% Jump Shows Its Popularity With Investors

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Miracll Chemicals Co.,Ltd (SZSE:300848) shares have continued their recent momentum with a 26% gain in the last month alone. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

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 4.9x P/S ratio. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Miracll ChemicalsLtd

SZSE:300848 Price to Sales Ratio vs Industry May 22nd 2024

How Miracll ChemicalsLtd Has Been Performing

Recent times have been pleasing for Miracll ChemicalsLtd as its revenue has risen in spite of the industry's average revenue going into reverse. It seems that many are expecting the company to continue defying the broader industry adversity, which has increased investors’ willingness to pay up for the stock. If not, then existing shareholders might be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Miracll ChemicalsLtd.

How Is Miracll ChemicalsLtd's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Miracll ChemicalsLtd's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. The latest three year period has also seen an excellent 69% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 160% over the next year. With the industry only predicted to deliver 23%, the company is positioned for a stronger revenue result.

With this information, we can see why Miracll ChemicalsLtd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

The strong share price surge has lead to Miracll ChemicalsLtd's P/S soaring as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

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. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Miracll ChemicalsLtd (1 can't be ignored) you should be aware of.

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

Valuation is complex, but we're helping make it simple.

Find out whether Miracll ChemicalsLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.