Jiangsu Lihua Animal Husbandry Co., Ltd.'s (SZSE:300761) price-to-sales (or "P/S") ratio of 1.1x might make it look like a buy right now compared to the Food industry in China, where around half of the companies have P/S ratios above 2x and even P/S above 4x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Jiangsu Lihua Animal Husbandry

How Jiangsu Lihua Animal Husbandry Has Been Performing

Jiangsu Lihua Animal Husbandry certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

How Is Jiangsu Lihua Animal Husbandry's Revenue Growth Trending?

Jiangsu Lihua Animal Husbandry's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 17% last year. The latest three year period has also seen an excellent 82% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 6.7% during the coming year according to the six analysts following the company. That's shaping up to be materially lower than the 17% growth forecast for the broader industry.

With this in consideration, its clear as to why Jiangsu Lihua Animal Husbandry's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Jiangsu Lihua Animal Husbandry's 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 Jiangsu Lihua Animal Husbandry maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Jiangsu Lihua Animal Husbandry that you should be aware of.

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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