Xinjiang Tianshun Supply Chain Co., Ltd.'s (SZSE:002800) 36% Price Boost Is Out Of Tune With Revenues

Despite an already strong run, Xinjiang Tianshun Supply Chain Co., Ltd. (SZSE:002800) shares have been powering on, with a gain of 36% in the last thirty days. Looking further back, the 19% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, there still wouldn't be many who think Xinjiang Tianshun Supply Chain's price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S in China's Logistics industry is similar at about 1.2x. 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.

View our latest analysis for Xinjiang Tianshun Supply Chain

How Has Xinjiang Tianshun Supply Chain Performed Recently?

Revenue has risen firmly for Xinjiang Tianshun Supply Chain recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on Xinjiang Tianshun Supply Chain 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 Xinjiang Tianshun Supply Chain will help you shine a light on its historical performance.

How Is Xinjiang Tianshun Supply Chain's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Xinjiang Tianshun Supply Chain's is when the company's growth is tracking the industry closely.

Taking a look back first, we see that the company managed to grow revenues by a handy 13% last year. The latest three year period has also seen a 8.2% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 15% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that Xinjiang Tianshun Supply Chain'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 Xinjiang Tianshun Supply Chain's P/S?

Xinjiang Tianshun Supply Chain appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Our examination of Xinjiang Tianshun Supply Chain 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. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Having said that, be aware Xinjiang Tianshun Supply Chain is showing 2 warning signs in our investment analysis, you should know about.

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.