Jiangsu Boxin Investing&Holdings Co.,Ltd. (SHSE:600083) shares have had a really impressive month, gaining 34% after a shaky period beforehand. Taking a wider view, although not as strong as the last month, the full year gain of 16% is also fairly reasonable.

Since its price has surged higher, you could be forgiven for thinking Jiangsu Boxin Investing&HoldingsLtd is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 6x, considering almost half the companies in China's Trade Distributors industry have P/S ratios below 0.7x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

What Does Jiangsu Boxin Investing&HoldingsLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Jiangsu Boxin Investing&HoldingsLtd over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For Jiangsu Boxin Investing&HoldingsLtd?

Jiangsu Boxin Investing&HoldingsLtd's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Retrospectively, the last year delivered a frustrating 34% decrease to the company's top line. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, despite the drawbacks experienced in the last 12 months. Accordingly, shareholders will be pleased, but also have some serious questions to ponder about the last 12 months.

This is in contrast to the rest of the industry, which is expected to grow by 18% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this information, we can see why Jiangsu Boxin Investing&HoldingsLtd is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

The Key Takeaway

The strong share price surge has lead to Jiangsu Boxin Investing&HoldingsLtd's P/S soaring as well. 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.

We've established that Jiangsu Boxin Investing&HoldingsLtd maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. Right now shareholders are comfortable with the P/S as they are quite confident revenue aren't under threat. Barring any significant changes to the company's ability to make money, the share price should continue to be propped up.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Jiangsu Boxin Investing&HoldingsLtd 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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