Keshun Waterproof Technolgies Co.,Ltd. (SZSE:300737) shareholders have had their patience rewarded with a 43% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 17% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Keshun Waterproof TechnolgiesLtd's price-to-sales (or "P/S") ratio of 1x is worth a mention when the median P/S in China's Basic Materials industry is similar at about 1.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

How Keshun Waterproof TechnolgiesLtd Has Been Performing

Recent times haven't been great for Keshun Waterproof TechnolgiesLtd as its revenue has been falling quicker than most other companies. Perhaps the market is expecting future revenue performance to begin matching the rest of the industry, which has kept the P/S from declining. You'd much rather the company improve its revenue if you still believe in the business. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

Is There Some Revenue Growth Forecasted For Keshun Waterproof TechnolgiesLtd?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Keshun Waterproof TechnolgiesLtd's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 9.9%. As a result, revenue from three years ago have also fallen 3.6% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the seven analysts following the company. With the industry only predicted to deliver 7.6%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Keshun Waterproof TechnolgiesLtd is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Keshun Waterproof TechnolgiesLtd's P/S?

Keshun Waterproof TechnolgiesLtd's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

Despite enticing revenue growth figures that outpace the industry, Keshun Waterproof TechnolgiesLtd's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

Before you take the next step, you should know about the 2 warning signs for Keshun Waterproof TechnolgiesLtd (1 makes us a bit uncomfortable!) that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.