The Ningxia Xiaoming Agriculture & Animal Husbandry Co.,Ltd (SZSE:300967) share price has done very well over the last month, posting an excellent gain of 30%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

After such a large jump in price, when almost half of the companies in China's Food industry have price-to-sales ratios (or "P/S") below 1.7x, you may consider Ningxia Xiaoming Agriculture & Animal HusbandryLtd as a stock probably not worth researching with its 2.6x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

How Ningxia Xiaoming Agriculture & Animal HusbandryLtd Has Been Performing

As an illustration, revenue has deteriorated at Ningxia Xiaoming Agriculture & Animal HusbandryLtd 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. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

How Is Ningxia Xiaoming Agriculture & Animal HusbandryLtd's Revenue Growth Trending?

Ningxia Xiaoming Agriculture & Animal HusbandryLtd's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered a frustrating 1.8% decrease to the company's top line. Still, the latest three year period has seen an excellent 42% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 10% shows it's noticeably more attractive.

With this in consideration, it's not hard to understand why Ningxia Xiaoming Agriculture & Animal HusbandryLtd's P/S is high relative to its industry peers. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.

What Does Ningxia Xiaoming Agriculture & Animal HusbandryLtd's P/S Mean For Investors?

Ningxia Xiaoming Agriculture & Animal HusbandryLtd shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Ningxia Xiaoming Agriculture & Animal HusbandryLtd 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. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for Ningxia Xiaoming Agriculture & Animal HusbandryLtd (2 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Ningxia Xiaoming Agriculture & Animal HusbandryLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.