Ningbo Joy Intelligent Logistics Technology Co.,Ltd. (SZSE:301198) shares have continued their recent momentum with a 43% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

Following the firm bounce in price, you could be forgiven for thinking Ningbo Joy Intelligent Logistics TechnologyLtd is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 5.1x, considering almost half the companies in China's Packaging industry have P/S ratios below 1.8x. 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 Ningbo Joy Intelligent Logistics TechnologyLtd's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Ningbo Joy Intelligent Logistics TechnologyLtd's revenue has gone into reverse gear, which is not great. One possibility is that the P/S ratio is high because investors think this poor revenue performance will turn the corner. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Is There Enough Revenue Growth Forecasted For Ningbo Joy Intelligent Logistics TechnologyLtd?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Ningbo Joy Intelligent Logistics TechnologyLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 17% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 10% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 26% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 17%, which is noticeably less attractive.

In light of this, it's understandable that Ningbo Joy Intelligent Logistics TechnologyLtd's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What We Can Learn From Ningbo Joy Intelligent Logistics TechnologyLtd's P/S?

The strong share price surge has lead to Ningbo Joy Intelligent Logistics TechnologyLtd's P/S soaring as well. 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.

As we suspected, our examination of Ningbo Joy Intelligent Logistics TechnologyLtd's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Having said that, be aware Ningbo Joy Intelligent Logistics TechnologyLtd is showing 4 warning signs in our investment analysis, and 3 of those are a bit concerning.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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