Improved Revenues Required Before Shanghai Aerospace Automobile Electromechanical Co., Ltd. (SHSE:600151) Stock's 27% Jump Looks Justified

Shanghai Aerospace Automobile Electromechanical Co., Ltd. (SHSE:600151) shareholders are no doubt pleased to see that the share price has bounced 27% 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 45% in the last twelve months.

Although its price has surged higher, when close to half the companies operating in China's Auto Components industry have price-to-sales ratios (or "P/S") above 2.3x, you may still consider Shanghai Aerospace Automobile Electromechanical as an enticing stock to check out with its 0.7x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Shanghai Aerospace Automobile Electromechanical

How Has Shanghai Aerospace Automobile Electromechanical Performed Recently?

Shanghai Aerospace Automobile Electromechanical certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. Those who are bullish on Shanghai Aerospace Automobile Electromechanical will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Shanghai Aerospace Automobile Electromechanical, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Shanghai Aerospace Automobile Electromechanical?

The only time you'd be truly comfortable seeing a P/S as low as Shanghai Aerospace Automobile Electromechanical's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company grew revenue by an impressive 32% last year. Pleasingly, revenue has also lifted 64% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 25% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Shanghai Aerospace Automobile Electromechanical's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Shanghai Aerospace Automobile Electromechanical's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Shanghai Aerospace Automobile Electromechanical's P/S close to the industry median. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

In line with expectations, Shanghai Aerospace Automobile Electromechanical maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Shanghai Aerospace Automobile Electromechanical with six simple checks.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.