Despite an already strong run, TianYu Bio-Technology Co., Ltd. (SHSE:603717) shares have been powering on, with a gain of 32% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 8.8% isn't as attractive.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about TianYu Bio-Technology's P/S ratio of 3.5x, since the median price-to-sales (or "P/S") ratio for the Commercial Services industry in China is about the same. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

What Does TianYu Bio-Technology's Recent Performance Look Like?

For instance, TianYu Bio-Technology's receding revenue in recent times would have to be some food for thought. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

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

In order to justify its P/S ratio, TianYu Bio-Technology would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 21%. Regardless, revenue has managed to lift by a handy 20% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is predicted to deliver 35% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that TianYu Bio-Technology's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On TianYu Bio-Technology's P/S

TianYu Bio-Technology appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of TianYu Bio-Technology revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Having said that, be aware TianYu Bio-Technology is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of TianYu Bio-Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.