China Vanadium Titano-Magnetite Mining Company Limited (HKG:893) Stock Rockets 39% As Investors Are Less Pessimistic Than Expected

Despite an already strong run, China Vanadium Titano-Magnetite Mining Company Limited (HKG:893) shares have been powering on, with a gain of 39% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 71% in the last year.

In spite of the firm bounce in price, it's still not a stretch to say that China Vanadium Titano-Magnetite Mining's price-to-sales (or "P/S") ratio of 0.4x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in Hong Kong, where the median P/S ratio is around 0.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

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View our latest analysis for China Vanadium Titano-Magnetite Mining

How China Vanadium Titano-Magnetite Mining Has Been Performing

For instance, China Vanadium Titano-Magnetite Mining's receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for China Vanadium Titano-Magnetite Mining, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The P/S Ratio?

China Vanadium Titano-Magnetite Mining's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a frustrating 31% decrease to the company's top line. As a result, revenue from three years ago have also fallen 24% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 11% shows it's an unpleasant look.

In light of this, it's somewhat alarming that China Vanadium Titano-Magnetite Mining's P/S sits in line with the majority of other companies. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh on the share price eventually.

What Does China Vanadium Titano-Magnetite Mining's P/S Mean For Investors?

China Vanadium Titano-Magnetite Mining appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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 look at China Vanadium Titano-Magnetite Mining revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

It is also worth noting that we have found 3 warning signs for China Vanadium Titano-Magnetite Mining (2 are significant!) that you need to take into consideration.

If you're unsure about the strength of China Vanadium Titano-Magnetite Mining's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.