With a median price-to-sales (or "P/S") ratio of close to 1.3x in the Metals and Mining industry in China, you could be forgiven for feeling indifferent about China Nonferrous Metal Industry's Foreign Engineering and Construction Co.,Ltd.'s (SZSE:000758) P/S ratio of 0.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

How Has China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd Performed Recently?

China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

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

In order to justify its P/S ratio, China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 23% last year. The strong recent performance means it was also able to grow revenue by 47% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

It's interesting to note that the rest of the industry is similarly expected to grow by 14% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we can see why China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on assuming the company will continue keeping a low profile.

What Does China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd's P/S Mean For Investors?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It appears to us that China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd with six simple checks will allow you to discover any risks that could be an issue.

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.