Investors Appear Satisfied With YiChang HEC ChangJiang Pharmaceutical Co., Ltd.'s (HKG:1558) Prospects As Shares Rocket 33%

YiChang HEC ChangJiang Pharmaceutical Co., Ltd. (HKG:1558) shares have had a really impressive month, gaining 33% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 39% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think YiChang HEC ChangJiang Pharmaceutical's price-to-sales (or "P/S") ratio of 1.6x is worth a mention when the median P/S in Hong Kong's Pharmaceuticals industry is similar at about 1.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for YiChang HEC ChangJiang Pharmaceutical

What Does YiChang HEC ChangJiang Pharmaceutical's Recent Performance Look Like?

YiChang HEC ChangJiang Pharmaceutical certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is moderate because investors think this strong revenue performance might be about to tail off. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on YiChang HEC ChangJiang Pharmaceutical will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like YiChang HEC ChangJiang Pharmaceutical's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 182% gain to the company's top line. The latest three year period has also seen a 8.1% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 15% during the coming year according to the two analysts following the company. With the industry predicted to deliver 14% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that YiChang HEC ChangJiang Pharmaceutical's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On YiChang HEC ChangJiang Pharmaceutical's P/S

Its shares have lifted substantially and now YiChang HEC ChangJiang Pharmaceutical's P/S is back within range of the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at YiChang HEC ChangJiang Pharmaceutical's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. All things considered, if the P/S and revenue estimates contain no major shocks, then it's hard to see the share price moving strongly in either direction in the near future.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for YiChang HEC ChangJiang Pharmaceutical with six simple checks on some of these key factors.

If you're unsure about the strength of YiChang HEC ChangJiang Pharmaceutical'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.