Shenzhen Jove Enterprise Limited's (SZSE:300814) 26% Price Boost Is Out Of Tune With Revenues

Shenzhen Jove Enterprise Limited (SZSE:300814) shares have had a really impressive month, gaining 26% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 48%.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Shenzhen Jove Enterprise's P/S ratio of 4.8x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in China is also close to 4.4x. 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.

Check out our latest analysis for Shenzhen Jove Enterprise

What Does Shenzhen Jove Enterprise's P/S Mean For Shareholders?

It looks like revenue growth has deserted Shenzhen Jove Enterprise recently, which is not something to boast about. It might be that many expect the uninspiring revenue performance to only match most other companies at best over the coming period, which has kept the P/S from rising. Those who are bullish on Shenzhen Jove Enterprise 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 Shenzhen Jove Enterprise will help you shine a light on its historical performance.

How Is Shenzhen Jove Enterprise's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Shenzhen Jove Enterprise's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Still, the latest three year period was better as it's delivered a decent 8.2% overall rise in revenue. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 26% 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 Shenzhen Jove Enterprise's P/S is comparable to that of its industry peers. 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 Shenzhen Jove Enterprise's P/S

Its shares have lifted substantially and now Shenzhen Jove Enterprise'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.

Our examination of Shenzhen Jove Enterprise 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. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. 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 4 warning signs for Shenzhen Jove Enterprise (2 don't sit too well with us!) that we have uncovered.

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.