Nanofilm Technologies International Limited (SGX:MZH) Looks Just Right With A 27% Price Jump

Nanofilm Technologies International Limited (SGX:MZH) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 47% over that time.

Following the firm bounce in price, when almost half of the companies in Singapore's Chemicals industry have price-to-sales ratios (or "P/S") below 0.8x, you may consider Nanofilm Technologies International as a stock probably not worth researching with its 2.8x P/S ratio. 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 Nanofilm Technologies International

How Has Nanofilm Technologies International Performed Recently?

Recent times haven't been great for Nanofilm Technologies International as its revenue has been falling quicker than most other companies. One possibility is that the P/S ratio is high because investors think the company will turn things around completely and accelerate past most others in the industry. If not, then existing shareholders may be very nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nanofilm Technologies International.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Nanofilm Technologies International's is when the company's growth is on track to outshine the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 25%. As a result, revenue from three years ago have also fallen 19% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 16% per year as estimated by the seven analysts watching the company. With the industry only predicted to deliver 9.3% each year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Nanofilm Technologies International's 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 We Can Learn From Nanofilm Technologies International's P/S?

Nanofilm Technologies International's P/S is on the rise since its shares have risen strongly. 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.

As we suspected, our examination of Nanofilm Technologies International's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Nanofilm Technologies International that you need to be mindful of.

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.