Jiangsu High Hope International Group Corporation's (SHSE:600981) Shares Climb 30% But Its Business Is Yet to Catch Up

Despite an already strong run, Jiangsu High Hope International Group Corporation (SHSE:600981) shares have been powering on, with a gain of 30% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 3.6% in the last twelve months.

Although its price has surged higher, there still wouldn't be many who think Jiangsu High Hope International Group's price-to-sales (or "P/S") ratio of 0.1x is worth a mention when the median P/S in China's Retail Distributors industry is similar at about 0.5x. 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.

See our latest analysis for Jiangsu High Hope International Group

What Does Jiangsu High Hope International Group's Recent Performance Look Like?

The recent revenue growth at Jiangsu High Hope International Group would have to be considered satisfactory if not spectacular. 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 Jiangsu High Hope International Group will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Jiangsu High Hope International Group?

Jiangsu High Hope International Group's 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.

Taking a look back first, we see that the company managed to grow revenues by a handy 5.3% last year. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 27% shows it's noticeably less attractive.

With this information, we find it interesting that Jiangsu High Hope International Group is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Jiangsu High Hope International Group's P/S

Its shares have lifted substantially and now Jiangsu High Hope International Group's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Jiangsu High Hope International Group's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Jiangsu High Hope International Group (of which 2 make us uncomfortable!) you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.