Zhejiang Zhongxin Fluoride Materials Co.,Ltd (SZSE:002915) shareholders have had their patience rewarded with a 27% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 16% in the last twelve months.

Following the firm bounce in price, when almost half of the companies in China's Chemicals industry have price-to-sales ratios (or "P/S") below 2.3x, you may consider Zhejiang Zhongxin Fluoride MaterialsLtd as a stock probably not worth researching with its 4x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Zhejiang Zhongxin Fluoride MaterialsLtd

What Does Zhejiang Zhongxin Fluoride MaterialsLtd's P/S Mean For Shareholders?

Zhejiang Zhongxin Fluoride MaterialsLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting the poor revenue to reverse, justifying it's current high P/S.. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Enough Revenue Growth Forecasted For Zhejiang Zhongxin Fluoride MaterialsLtd?

In order to justify its P/S ratio, Zhejiang Zhongxin Fluoride MaterialsLtd would need to produce impressive growth in excess of the industry.

Retrospectively, the last year delivered a frustrating 14% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 30% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 74% during the coming year according to the two analysts following the company. That's shaping up to be materially higher than the 30% growth forecast for the broader industry.

In light of this, it's understandable that Zhejiang Zhongxin Fluoride MaterialsLtd'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 Does Zhejiang Zhongxin Fluoride MaterialsLtd's P/S Mean For Investors?

The large bounce in Zhejiang Zhongxin Fluoride MaterialsLtd's shares has lifted the company's P/S handsomely. 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 into Zhejiang Zhongxin Fluoride MaterialsLtd shows that its P/S ratio remains high on the merit of its strong future revenues. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 4 warning signs for Zhejiang Zhongxin Fluoride MaterialsLtd (2 are significant) you should be aware of.

If these risks are making you reconsider your opinion on Zhejiang Zhongxin Fluoride MaterialsLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.