When close to half the companies operating in the Metals and Mining industry in China have price-to-sales ratios (or "P/S") above 1.1x, you may consider Rising Nonferrous Metals Share Co.,Ltd. (SHSE:600259) as an attractive investment with its 0.5x 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 limited.

How Rising Nonferrous Metals ShareLtd Has Been Performing

While the industry has experienced revenue growth lately, Rising Nonferrous Metals ShareLtd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 32%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 41% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next year should generate growth of 38% as estimated by the only analyst watching the company. With the industry only predicted to deliver 12%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Rising Nonferrous Metals ShareLtd is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A look at Rising Nonferrous Metals ShareLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Rising Nonferrous Metals ShareLtd you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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