Jiangsu Pacific Quartz Co., Ltd's (SHSE:603688) price-to-sales (or "P/S") ratio of 4.8x might make it look like a buy right now compared to the Semiconductor industry in China, where around half of the companies have P/S ratios above 7.5x and even P/S above 15x 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.

See our latest analysis for Jiangsu Pacific Quartz

How Jiangsu Pacific Quartz Has Been Performing

With revenue growth that's superior to most other companies of late, Jiangsu Pacific Quartz has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Jiangsu Pacific Quartz?

The only time you'd be truly comfortable seeing a P/S as low as Jiangsu Pacific Quartz's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company's revenues underwent some rampant growth over the last 12 months. Spectacularly, three year revenue growth has also set the world alight, thanks to the last 12 months of incredible growth. Accordingly, shareholders would have been over the moon with those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 81% as estimated by the four analysts watching the company. That's shaping up to be materially higher than the 40% growth forecast for the broader industry.

With this information, we find it odd that Jiangsu Pacific Quartz is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

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.

Jiangsu Pacific Quartz's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Jiangsu Pacific Quartz (1 is potentially serious) 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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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.