Some NanJing Sanchao Advanced Materials Co.,Ltd. (SZSE:300554) Shareholders Look For Exit As Shares Take 26% Pounding

NanJing Sanchao Advanced Materials Co.,Ltd. (SZSE:300554) shares have had a horrible month, losing 26% after a relatively good period beforehand. Longer-term shareholders would now have taken a real hit with the stock declining 4.9% in the last year.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about NanJing Sanchao Advanced MaterialsLtd's P/S ratio of 4.8x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in China is also close to 5.8x. 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 NanJing Sanchao Advanced MaterialsLtd

How NanJing Sanchao Advanced MaterialsLtd Has Been Performing

NanJing Sanchao Advanced MaterialsLtd has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. Those who are bullish on NanJing Sanchao Advanced MaterialsLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

How Is NanJing Sanchao Advanced MaterialsLtd's Revenue Growth Trending?

NanJing Sanchao Advanced MaterialsLtd'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.

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. Pleasingly, revenue has also lifted 86% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 34% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that NanJing Sanchao Advanced MaterialsLtd's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What We Can Learn From NanJing Sanchao Advanced MaterialsLtd's P/S?

NanJing Sanchao Advanced MaterialsLtd's plummeting stock price has brought its P/S back to a similar region as the rest of the industry. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our examination of NanJing Sanchao Advanced MaterialsLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. 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. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Before you take the next step, you should know about the 3 warning signs for NanJing Sanchao Advanced MaterialsLtd (2 are concerning!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.