Shenzhen SunXing Light Alloys Materials Co.,Ltd. (SHSE:603978) shareholders are no doubt pleased to see that the share price has bounced 34% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 40% in the last twelve months.

Even after such a large jump in price, it's still not a stretch to say that Shenzhen SunXing Light Alloys MaterialsLtd's price-to-sales (or "P/S") ratio of 1.3x right now seems quite "middle-of-the-road" compared to the Metals and Mining industry in China, seeing as it matches the P/S ratio of the wider industry. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has Shenzhen SunXing Light Alloys MaterialsLtd Performed Recently?

The recent revenue growth at Shenzhen SunXing Light Alloys MaterialsLtd would have to be considered satisfactory if not spectacular. It might be that many expect the respectable revenue performance to only match most other companies over the coming period, which has kept the P/S from rising. If not, then at least existing shareholders probably aren't too pessimistic about the future direction of the share price.

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

Shenzhen SunXing Light Alloys MaterialsLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Retrospectively, the last year delivered a decent 4.3% gain to the company's revenues. The latest three year period has also seen an excellent 56% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 14% growth in the next 12 months, the company's momentum is pretty similar based on recent medium-term annualised revenue results.

With this information, we can see why Shenzhen SunXing Light Alloys MaterialsLtd is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

What Does Shenzhen SunXing Light Alloys MaterialsLtd's P/S Mean For Investors?

Shenzhen SunXing Light Alloys MaterialsLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

As we've seen, Shenzhen SunXing Light Alloys MaterialsLtd's three-year revenue trends seem to be contributing to its P/S, given they look similar to current industry expectations. Currently, with a past revenue trend that aligns closely wit the industry outlook, shareholders are confident the company's future revenue outlook won't contain any major surprises. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 3 warning signs for Shenzhen SunXing Light Alloys MaterialsLtd (2 don't sit too well with us!) that we have uncovered.

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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