Jiangsu Yuxing Film Technology Co., Ltd (SZSE:300305) shareholders have had their patience rewarded with a 39% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Jiangsu Yuxing Film Technology's P/S ratio of 2.3x, since the median price-to-sales (or "P/S") ratio for the Chemicals industry in China is also close to 2.1x. 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 Jiangsu Yuxing Film Technology Has Been Performing

Jiangsu Yuxing Film Technology hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

In order to justify its P/S ratio, Jiangsu Yuxing Film Technology would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 26% decrease to the company's top line. Still, the latest three year period has seen an excellent 32% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 36% as estimated by the dual analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 22%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Jiangsu Yuxing Film Technology's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Jiangsu Yuxing Film Technology's P/S Mean For Investors?

Its shares have lifted substantially and now Jiangsu Yuxing Film Technology's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Jiangsu Yuxing Film Technology currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Jiangsu Yuxing Film Technology (2 can't be ignored) you should be aware of.

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.