Sentiment Still Eluding Kunshan Huguang Auto Harness Co.,Ltd. (SHSE:605333)

With a median price-to-sales (or "P/S") ratio of close to 2.3x in the Auto Components industry in China, you could be forgiven for feeling indifferent about Kunshan Huguang Auto Harness Co.,Ltd.'s (SHSE:605333) P/S ratio of 2.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Kunshan Huguang Auto HarnessLtd

What Does Kunshan Huguang Auto HarnessLtd's P/S Mean For Shareholders?

Recent times have been advantageous for Kunshan Huguang Auto HarnessLtd as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Keen to find out how analysts think Kunshan Huguang Auto HarnessLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Kunshan Huguang Auto HarnessLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Kunshan Huguang Auto HarnessLtd's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 82%. The strong recent performance means it was also able to grow revenue by 210% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 47% during the coming year according to the six analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 24%, which is noticeably less attractive.

With this information, we find it interesting that Kunshan Huguang Auto HarnessLtd is trading at a fairly similar P/S compared to the industry. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Bottom Line On Kunshan Huguang Auto HarnessLtd's P/S

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Kunshan Huguang Auto HarnessLtd currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

It is also worth noting that we have found 1 warning sign for Kunshan Huguang Auto HarnessLtd that you need to take into consideration.

If these risks are making you reconsider your opinion on Kunshan Huguang Auto HarnessLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.