HyUnion Holding Co.,Ltd's (SZSE:002537) Revenues Are Not Doing Enough For Some Investors

HyUnion Holding Co.,Ltd's (SZSE:002537) price-to-sales (or "P/S") ratio of 0.7x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Auto Components industry in China have P/S ratios greater than 1.9x. 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 HyUnion HoldingLtd

What Does HyUnion HoldingLtd's Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for HyUnion HoldingLtd, which is generally not a bad outcome. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on HyUnion HoldingLtd will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

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

If we review the last year of revenue growth, the company posted a worthy increase of 3.1%. The latest three year period has also seen a 22% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

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

In light of this, it's understandable that HyUnion HoldingLtd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Final Word

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

In line with expectations, HyUnion HoldingLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. 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.

Plus, you should also learn about this 1 warning sign we've spotted with HyUnion HoldingLtd.

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.

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