Jilin University Zhengyuan Information Technologies Co., Ltd.'s (SZSE:003029) 32% Jump Shows Its Popularity With Investors

Jilin University Zhengyuan Information Technologies Co., Ltd. (SZSE:003029) shares have had a really impressive month, gaining 32% after a shaky period beforehand. The last month tops off a massive increase of 104% in the last year.

Since its price has surged higher, when almost half of the companies in China's Software industry have price-to-sales ratios (or "P/S") below 7.5x, you may consider Jilin University Zhengyuan Information Technologies as a stock not worth researching with its 13.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Jilin University Zhengyuan Information Technologies

How Jilin University Zhengyuan Information Technologies Has Been Performing

Jilin University Zhengyuan Information Technologies hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. If not, then existing shareholders may be extremely nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Jilin University Zhengyuan Information Technologies.

How Is Jilin University Zhengyuan Information Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Jilin University Zhengyuan Information Technologies would need to produce outstanding growth that's well in excess of the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 30%. The last three years don't look nice either as the company has shrunk revenue by 49% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 152% over the next year. That's shaping up to be materially higher than the 28% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Jilin University Zhengyuan Information Technologies' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From Jilin University Zhengyuan Information Technologies' P/S?

Shares in Jilin University Zhengyuan Information Technologies have seen a strong upwards swing lately, which has really helped boost its P/S figure. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Jilin University Zhengyuan Information Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Software industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Jilin University Zhengyuan Information Technologies that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.