Jiangsu Sidike New Materials Science & Technology Co., Ltd. (SZSE:300806) shareholders would be excited to see that the share price has had a great month, posting a 38% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 22% over that time.

Following the firm bounce in price, you could be forgiven for thinking Jiangsu Sidike New Materials Science & Technology is a stock not worth researching with a price-to-sales ratios (or "P/S") of 2.6x, considering almost half the companies in China's Chemicals industry have P/S ratios below 2.1x. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

What Does Jiangsu Sidike New Materials Science & Technology's Recent Performance Look Like?

Revenue has risen firmly for Jiangsu Sidike New Materials Science & Technology recently, which is pleasing to see. It might be that many expect the respectable revenue performance to beat most other companies over the coming period, which has increased investors' willingness to pay up for the stock. If not, then existing shareholders may be a little nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For Jiangsu Sidike New Materials Science & Technology?

Jiangsu Sidike New Materials Science & Technology's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 27%. The latest three year period has also seen a 28% overall rise in revenue, aided extensively by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 21% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we find it concerning that Jiangsu Sidike New Materials Science & Technology is trading at a P/S higher than the industry. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What Does Jiangsu Sidike New Materials Science & Technology's P/S Mean For Investors?

Jiangsu Sidike New Materials Science & Technology shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

Our examination of Jiangsu Sidike New Materials Science & Technology revealed its poor three-year revenue trends aren't detracting from the P/S as much as we though, given they look worse than current industry expectations. Right now we aren't comfortable with the high P/S as this revenue performance isn't likely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these the share price as being reasonable.

You need to take note of risks, for example - Jiangsu Sidike New Materials Science & Technology has 5 warning signs (and 3 which don't sit too well with us) we think you should know about.

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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