Niu Technologies (NASDAQ:NIU) shareholders have had their patience rewarded with a 47% share price jump in the last month. Unfortunately, despite the strong performance over the last month, the full year gain of 4.9% isn't as attractive.

Even after such a large jump in price, Niu Technologies' price-to-sales (or "P/S") ratio of 0.5x might still make it look like a buy right now compared to the Auto industry in the United States, where around half of the companies have P/S ratios above 1.5x and even P/S above 12x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Niu Technologies' P/S Mean For Shareholders?

Niu Technologies could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

How Is Niu Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Niu Technologies would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.3%. The last three years don't look nice either as the company has shrunk revenue by 6.8% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 44% as estimated by the three analysts watching the company. With the industry only predicted to deliver 14%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Niu Technologies' P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Niu Technologies' P/S Mean For Investors?

Niu Technologies' stock price has surged recently, but its but its P/S still remains modest. 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.

Niu Technologies' analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Niu Technologies with six simple checks will allow you to discover any risks that could be an issue.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.