Aerospace Hi-Tech Holding Group Co., Ltd.'s (SZSE:000901) Business And Shares Still Trailing The Industry

When you see that almost half of the companies in the Auto Components industry in China have price-to-sales ratios (or "P/S") above 2.1x, Aerospace Hi-Tech Holding Group Co., Ltd. (SZSE:000901) looks to be giving off some buy signals with its 0.9x 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 Aerospace Hi-Tech Holding Group

How Has Aerospace Hi-Tech Holding Group Performed Recently?

Revenue has risen firmly for Aerospace Hi-Tech Holding Group recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Aerospace Hi-Tech Holding Group will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Aerospace Hi-Tech Holding Group will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Aerospace Hi-Tech Holding Group?

The only time you'd be truly comfortable seeing a P/S as low as Aerospace Hi-Tech Holding Group's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered an exceptional 18% gain to the company's top line. Revenue has also lifted 23% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the 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 Aerospace Hi-Tech Holding Group'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.

The Final Word

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.

As we suspected, our examination of Aerospace Hi-Tech Holding Group revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Aerospace Hi-Tech Holding Group you should know about.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.