Yinbang Clad Material Co.,Ltd (SZSE:300337) shareholders have had their patience rewarded with a 35% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 62% in the last year.

Following the firm bounce in price, when almost half of the companies in China's Metals and Mining industry have price-to-sales ratios (or "P/S") below 1.1x, you may consider Yinbang Clad MaterialLtd as a stock probably not worth researching with its 1.7x P/S ratio. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

How Yinbang Clad MaterialLtd Has Been Performing

Yinbang Clad MaterialLtd has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S ratio is high because investors think this respectable revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Yinbang Clad MaterialLtd's Revenue Growth Trending?

There's an inherent assumption that a company should outperform the industry for P/S ratios like Yinbang Clad MaterialLtd's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 15% last year. The strong recent performance means it was also able to grow revenue by 78% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 12% shows it's noticeably more attractive.

With this information, we can see why Yinbang Clad MaterialLtd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.

What We Can Learn From Yinbang Clad MaterialLtd's P/S?

Yinbang Clad MaterialLtd 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.

As we suspected, our examination of Yinbang Clad MaterialLtd revealed its three-year revenue trends are contributing to its high P/S, given they look better than current industry expectations. In the eyes of shareholders, the probability of a continued growth trajectory is great enough to prevent the P/S from pulling back. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Yinbang Clad MaterialLtd you should know about.

If you're unsure about the strength of Yinbang Clad MaterialLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.