China Vanadium Titano-Magnetite Mining Company Limited (HKG:893) Surges 33% Yet Its Low P/S Is No Reason For Excitement

China Vanadium Titano-Magnetite Mining Company Limited (HKG:893) shares have continued their recent momentum with a 33% gain in the last month alone. Looking back a bit further, it's encouraging to see the stock is up 28% in the last year.

In spite of the firm bounce in price, when close to half the companies operating in Hong Kong's Metals and Mining industry have price-to-sales ratios (or "P/S") above 1x, you may still consider China Vanadium Titano-Magnetite Mining as an enticing stock to check out with its 0.4x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for China Vanadium Titano-Magnetite Mining

What Does China Vanadium Titano-Magnetite Mining's Recent Performance Look Like?

For instance, China Vanadium Titano-Magnetite Mining's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

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.

How Is China Vanadium Titano-Magnetite Mining's Revenue Growth Trending?

In order to justify its P/S ratio, China Vanadium Titano-Magnetite Mining would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 33% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 24% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 15% shows it's an unpleasant look.

In light of this, it's understandable that China Vanadium Titano-Magnetite Mining's P/S would sit below the majority of other companies. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From China Vanadium Titano-Magnetite Mining's P/S?

The latest share price surge wasn't enough to lift China Vanadium Titano-Magnetite Mining's P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of China Vanadium Titano-Magnetite Mining confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

You need to take note of risks, for example - China Vanadium Titano-Magnetite Mining has 3 warning signs (and 1 which is significant) we think you should know about.

If these risks are making you reconsider your opinion on China Vanadium Titano-Magnetite Mining, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.