Zhejiang Risun Intelligent Technology Co.,Ltd (SHSE:688215) shareholders would be excited to see that the share price has had a great month, posting a 40% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 21% over that time.

Even after such a large jump in price, there still wouldn't be many who think Zhejiang Risun Intelligent TechnologyLtd's price-to-sales (or "P/S") ratio of 3x is worth a mention when the median P/S in China's Machinery industry is similar at about 2.8x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does Zhejiang Risun Intelligent TechnologyLtd's P/S Mean For Shareholders?

The revenue growth achieved at Zhejiang Risun Intelligent TechnologyLtd over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. 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.

How Is Zhejiang Risun Intelligent TechnologyLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Zhejiang Risun Intelligent TechnologyLtd's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 8.8% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 152% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is only predicted to deliver 23% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Zhejiang Risun Intelligent TechnologyLtd's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Zhejiang Risun Intelligent TechnologyLtd's P/S

Zhejiang Risun Intelligent TechnologyLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We didn't quite envision Zhejiang Risun Intelligent TechnologyLtd's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Zhejiang Risun Intelligent TechnologyLtd (including 1 which shouldn't be ignored).

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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