The Market Lifts Jiangxi GETO New Materials Corporation Limited (SZSE:300986) Shares 26% But It Can Do More

Jiangxi GETO New Materials Corporation Limited (SZSE:300986) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. But the last month did very little to improve the 57% share price decline over the last year.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Jiangxi GETO New Materials' P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Metals and Mining industry in China is also close to 1.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View 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 the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Jiangxi GETO New Materials' Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Jiangxi GETO New Materials' to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. The latest three year period has also seen an excellent 86% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 24% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

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

Jiangxi GETO New Materials' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Looking at Jiangxi GETO New Materials' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. 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. 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 3 warning signs for Jiangxi GETO New Materials (2 are potentially serious!) 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.