A Piece Of The Puzzle Missing From Suning.com Co., Ltd.'s (SZSE:002024) 31% Share Price Climb

Despite an already strong run, Suning.com Co., Ltd. (SZSE:002024) shares have been powering on, with a gain of 31% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 9.6% isn't as attractive.

Even after such a large jump in price, given about half the companies operating in China's Specialty Retail industry have price-to-sales ratios (or "P/S") above 1.4x, you may still consider Suning.com as an attractive investment with its 0.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Suning.com

How Suning.com Has Been Performing

Recent times haven't been great for Suning.com as its revenue has been falling quicker than most other companies. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Suning.com will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Suning.com?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Suning.com's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 19%. This means it has also seen a slide in revenue over the longer-term as revenue is down 72% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 47% as estimated by the sole analyst watching the company. With the industry only predicted to deliver 19%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Suning.com is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Suning.com's P/S

Despite Suning.com's share price climbing recently, its P/S still lags most other companies. 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.

To us, it seems Suning.com currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Suning.com with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Suning.com's 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.