Market Participants Recognise Jinchuan Group International Resources Co. Ltd's (HKG:2362) Revenues

Jinchuan Group International Resources Co. Ltd's (HKG:2362) price-to-sales (or "P/S") ratio of 1.4x may not look like an appealing investment opportunity when you consider close to half the companies in the Metals and Mining industry in Hong Kong have P/S ratios below 0.4x. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Jinchuan Group International Resources

How Has Jinchuan Group International Resources Performed Recently?

Jinchuan Group International Resources 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. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Jinchuan Group International Resources' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Jinchuan Group International Resources' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Jinchuan Group International Resources' is when the company's growth is on track to outshine 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 34%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 89% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 10%, which is noticeably less attractive.

In light of this, it's understandable that Jinchuan Group International Resources' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Jinchuan Group International Resources' P/S Mean For Investors?

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.

We've established that Jinchuan Group International Resources maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Metals and Mining industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. It's hard to see the share price falling strongly in the near future under these circumstances.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Jinchuan Group International Resources with six simple checks will allow you to discover any risks that could be an issue.

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.