Despite an already strong run, Jiangxi GETO New Materials Corporation Limited (SZSE:300986) shares have been powering on, with a gain of 28% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 10% over that time.

In spite of the firm bounce in price, it's still not a stretch to say that Jiangxi GETO New Materials' price-to-sales (or "P/S") ratio of 1.3x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in China, where the median P/S ratio is around 1.5x. 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.

What Does Jiangxi GETO New Materials' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Jiangxi GETO New Materials has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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

The only time you'd be comfortable seeing a P/S like Jiangxi GETO New Materials' is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 79% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 22% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 15%, which is noticeably less attractive.

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

What We Can Learn From Jiangxi GETO New Materials' P/S?

Its shares have lifted substantially and now Jiangxi GETO New Materials' P/S is back within range of the industry median. 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.

We've established that Jiangxi GETO New Materials 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. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 5 warning signs we've spotted with Jiangxi GETO New Materials (including 2 which are potentially serious).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.