When close to half the companies in the Communications industry in China have price-to-sales ratios (or "P/S") below 3.9x, you may consider Jushri Technologies, INC. (SZSE:300762) as a stock to avoid entirely with its 29.8x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.
SZSE:300762 Price to Sales Ratio vs Industry August 19th 2024
What Does Jushri Technologies' Recent Performance Look Like?
While the industry has experienced revenue growth lately, Jushri Technologies' revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. However, if this isn't the case, investors might get caught out paying too much for the stock.
Want the full picture on analyst estimates for the company? Then our free report on Jushri Technologies will help you uncover what's on the horizon.
How Is Jushri Technologies' Revenue Growth Trending?
The only time you'd be truly comfortable seeing a P/S as steep as Jushri Technologies' is when the company's growth is on track to outshine the industry decidedly.
Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 34%. The last three years don't look nice either as the company has shrunk revenue by 54% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.
Turning to the outlook, the next year should generate growth of 148% as estimated by the three analysts watching the company. That's shaping up to be materially higher than the 47% growth forecast for the broader industry.
With this in mind, it's not hard to understand why Jushri Technologies' P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.
The Bottom Line On Jushri Technologies' P/S
It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.
We've established that Jushri Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Communications industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.
It is also worth noting that we have found 1 warning sign for Jushri Technologies that you need to take into consideration.
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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