Nantong Jiangshan Agrochemical & Chemicals Co.,Ltd. (SHSE:600389) shareholders that were waiting for something to happen have been dealt a blow with a 29% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.

Since its price has dipped substantially, Nantong Jiangshan Agrochemical & ChemicalsLtd's price-to-sales (or "P/S") ratio of 1.1x might make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 1.9x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Nantong Jiangshan Agrochemical & ChemicalsLtd's P/S Mean For Shareholders?

Nantong Jiangshan Agrochemical & ChemicalsLtd hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

How Is Nantong Jiangshan Agrochemical & ChemicalsLtd's Revenue Growth Trending?

Nantong Jiangshan Agrochemical & ChemicalsLtd'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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 45%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 32% as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 26% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Nantong Jiangshan Agrochemical & ChemicalsLtd's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Nantong Jiangshan Agrochemical & ChemicalsLtd's P/S?

Nantong Jiangshan Agrochemical & ChemicalsLtd's P/S has taken a dip along with its share price. 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.

A look at Nantong Jiangshan Agrochemical & ChemicalsLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Nantong Jiangshan Agrochemical & ChemicalsLtd you should know about.

If you're unsure about the strength of Nantong Jiangshan Agrochemical & ChemicalsLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.