Even With A 38% Surge, Cautious Investors Are Not Rewarding Jiangxi GETO New Materials Corporation Limited's (SZSE:300986) Performance Completely

Despite an already strong run, Jiangxi GETO New Materials Corporation Limited (SZSE:300986) shares have been powering on, with a gain of 38% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 31% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think Jiangxi GETO New Materials' price-to-sales (or "P/S") ratio of 1.1x is worth a mention when the median P/S in China's Metals and Mining industry is similar at about 1.3x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Jiangxi GETO New Materials

What Does Jiangxi GETO New Materials' Recent Performance Look Like?

Recent times have been advantageous for Jiangxi GETO New Materials as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jiangxi GETO New Materials.

Do Revenue Forecasts Match The P/S Ratio?

Jiangxi GETO New Materials' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 9.3%. This was backed up an excellent period prior to see revenue up by 80% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Turning to the outlook, the next year should generate growth of 17% as estimated by the lone analyst watching the company. That's shaping up to be materially higher than the 13% growth forecast for the broader industry.

In light of this, it's curious that Jiangxi GETO New Materials' P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Jiangxi GETO New Materials' P/S

Its shares have lifted substantially and now Jiangxi GETO New Materials' P/S is back within range of the industry median. 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.

We've established that Jiangxi GETO New Materials currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Before you settle on your opinion, we've discovered 3 warning signs for Jiangxi GETO New Materials (2 shouldn't be ignored!) that you should be aware of.

If you're unsure about the strength of Jiangxi GETO New 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.