JinkoSolar Holding Co., Ltd. (NYSE:JKS) shareholders have had their patience rewarded with a 33% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 5.9% isn't as attractive.
In spite of the firm bounce in price, JinkoSolar Holding may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 0.1x, considering almost half of all companies in the Semiconductor industry in the United States have P/S ratios greater than 4x and even P/S higher than 11x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.
See our latest analysis for JinkoSolar Holding
How JinkoSolar Holding Has Been Performing
While the industry has experienced revenue growth lately, JinkoSolar Holding'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. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.
Keen to find out how analysts think JinkoSolar Holding's future stacks up against the industry? In that case, our free report is a great place to start.Is There Any Revenue Growth Forecasted For JinkoSolar Holding?
In order to justify its P/S ratio, JinkoSolar Holding would need to produce anemic growth that's substantially trailing the industry.
Retrospectively, the last year delivered a frustrating 30% decrease to the company's top line. Still, the latest three year period has seen an excellent 74% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.
Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 0.5% as estimated by the six analysts watching the company. With the industry predicted to deliver 30% growth, that's a disappointing outcome.
With this information, we are not surprised that JinkoSolar Holding is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.
The Final Word
Shares in JinkoSolar Holding have risen appreciably however, its P/S is still subdued. 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.
With revenue forecasts that are inferior to the rest of the industry, it's no surprise that JinkoSolar Holding's P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, JinkoSolar Holding's poor outlook justifies its low P/S ratio. It's hard to see the share price rising strongly in the near future under these circumstances.
We don't want to rain on the parade too much, but we did also find 2 warning signs for JinkoSolar Holding that you need to be mindful of.
If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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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.