Jing-jin Electric Technologies Co.,Ltd. (SHSE:688280) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 41% over that time.

Since its price has surged higher, when almost half of the companies in China's Auto Components industry have price-to-sales ratios (or "P/S") below 2x, you may consider Jing-jin Electric TechnologiesLtd as a stock probably not worth researching with its 2.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

What Does Jing-jin Electric TechnologiesLtd's Recent Performance Look Like?

Jing-jin Electric TechnologiesLtd has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For Jing-jin Electric TechnologiesLtd?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Jing-jin Electric TechnologiesLtd's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.8% last year. Pleasingly, revenue has also lifted 54% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenues over that time.

Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we find it concerning that Jing-jin Electric TechnologiesLtd is trading at a P/S higher than the industry. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What Does Jing-jin Electric TechnologiesLtd's P/S Mean For Investors?

Jing-jin Electric TechnologiesLtd shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

The fact that Jing-jin Electric TechnologiesLtd currently trades on a higher P/S relative to the industry is an oddity, since its recent three-year growth is lower than the wider industry forecast. Right now we aren't comfortable with the high P/S as this revenue performance isn't likely to support such positive sentiment for long. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

It is also worth noting that we have found 2 warning signs for Jing-jin Electric TechnologiesLtd that you need to take into consideration.

If these risks are making you reconsider your opinion on Jing-jin Electric TechnologiesLtd, 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.