Ningbo Bohui Chemical Technology Co.,Ltd (SZSE:300839) shares have continued their recent momentum with a 37% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 28% in the last twelve months.

Although its price has surged higher, Ningbo Bohui Chemical TechnologyLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.6x, since almost half of all companies in the Chemicals industry in China have P/S ratios greater than 2.2x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Ningbo Bohui Chemical TechnologyLtd's Recent Performance Look Like?

There hasn't been much to differentiate Ningbo Bohui Chemical TechnologyLtd's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on Ningbo Bohui Chemical TechnologyLtd will be hoping that this isn't the case.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as low as Ningbo Bohui Chemical TechnologyLtd's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 156% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the lone analyst covering the company suggest revenue should grow by 14% over the next year. With the industry predicted to deliver 21% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Ningbo Bohui Chemical TechnologyLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Ningbo Bohui Chemical TechnologyLtd's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Ningbo Bohui Chemical TechnologyLtd's P/S close to the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Ningbo Bohui Chemical TechnologyLtd's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You need to take note of risks, for example - Ningbo Bohui Chemical TechnologyLtd has 2 warning signs (and 1 which is potentially serious) we think you should know about.

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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