Zhejiang Wazam New Materials Co.,LTD.'s (SHSE:603186) Shares Leap 28% Yet They're Still Not Telling The Full Story

Zhejiang Wazam New Materials Co.,LTD. (SHSE:603186) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

Even after such a large jump in price, Zhejiang Wazam New MaterialsLTD's price-to-sales (or "P/S") ratio of 0.9x might still make it look like a strong buy right now compared to the wider Electronic industry in China, where around half of the companies have P/S ratios above 3.3x and even P/S above 6x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Zhejiang Wazam New MaterialsLTD

What Does Zhejiang Wazam New MaterialsLTD's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Zhejiang Wazam New MaterialsLTD has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. 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 out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Zhejiang Wazam New MaterialsLTD will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Zhejiang Wazam New MaterialsLTD?

The only time you'd be truly comfortable seeing a P/S as depressed as Zhejiang Wazam New MaterialsLTD's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. The solid recent performance means it was also able to grow revenue by 22% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 28% during the coming year according to the only analyst following the company. Meanwhile, the rest of the industry is forecast to expand by 29%, which is not materially different.

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

The Key Takeaway

Even after such a strong price move, Zhejiang Wazam New MaterialsLTD's P/S still trails the rest of 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.

Our examination of Zhejiang Wazam New MaterialsLTD's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Zhejiang Wazam New MaterialsLTD (1 is concerning) you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.