There's No Escaping Landai Technology Group Corp., Ltd.'s (SZSE:002765) Muted Revenues Despite A 31% Share Price Rise

Landai Technology Group Corp., Ltd. (SZSE:002765) shareholders have had their patience rewarded with a 31% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 19% over that time.

Although its price has surged higher, it would still be understandable if you think Landai Technology Group is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 1.2x, considering almost half the companies in China's Auto Components industry have P/S ratios above 2.3x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Landai Technology Group

What Does Landai Technology Group's P/S Mean For Shareholders?

Recent times haven't been great for Landai Technology Group as its revenue has been rising slower than most other companies. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Landai Technology Group?

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

Retrospectively, the last year delivered a decent 9.0% gain to the company's revenues. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Looking ahead now, revenue is anticipated to climb by 21% during the coming year according to the four analysts following the company. That's shaping up to be materially lower than the 25% growth forecast for the broader industry.

With this information, we can see why Landai Technology Group is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Despite Landai Technology Group's share price climbing recently, its P/S still lags most other companies. 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.

As expected, our analysis of Landai Technology Group's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Landai Technology Group 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.