Chongqing Millison Technologies INC.'s (SZSE:301307) P/S Is Still On The Mark Following 26% Share Price Bounce

Chongqing Millison Technologies INC. (SZSE:301307) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 8.8% isn't as impressive.

Even after such a large jump in price, there still wouldn't be many who think Chongqing Millison Technologies' price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S in China's Metals and Mining industry is similar at about 1.4x. 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.

Check out our latest analysis for Chongqing Millison Technologies

What Does Chongqing Millison Technologies' Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for Chongqing Millison Technologies, which is generally not a bad outcome. Perhaps the expectation moving forward is that the revenue growth will track in line with the wider industry for the near term, which has kept the P/S subdued. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Chongqing Millison Technologies will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Chongqing Millison Technologies' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.3% last year. Pleasingly, revenue has also lifted 50% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 14% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why Chongqing Millison Technologies is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

The Final Word

Chongqing Millison Technologies appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we've seen, Chongqing Millison Technologies' three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Chongqing Millison Technologies with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Chongqing Millison Technologies, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.