Jiangxi Black Cat Carbon Black Inc.,Ltd's (SZSE:002068) price-to-sales (or "P/S") ratio of 0.9x might make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 2.2x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Jiangxi Black Cat Carbon BlackLtd

What Does Jiangxi Black Cat Carbon BlackLtd's Recent Performance Look Like?

Jiangxi Black Cat Carbon BlackLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For Jiangxi Black Cat Carbon BlackLtd?

The only time you'd be truly comfortable seeing a P/S as low as Jiangxi Black Cat Carbon BlackLtd's is when the company's growth is on track to lag the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. However, a few strong years before that means that it was still able to grow revenue by an impressive 77% in total over the last three years. So while the company has done a solid job in the past, it's somewhat concerning to see revenue growth decline as much as it has.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 13% over the next year. With the industry predicted to deliver 29% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Jiangxi Black Cat Carbon BlackLtd's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Jiangxi Black Cat Carbon BlackLtd's P/S?

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 expected, our analysis of Jiangxi Black Cat Carbon BlackLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Jiangxi Black Cat Carbon BlackLtd (1 can't be ignored) you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.