Investors Holding Back On HAXC Holdings (Beijing) Co., Ltd. (SZSE:300928)

With a median price-to-sales (or "P/S") ratio of close to 2.2x in the Auto Components industry in China, you could be forgiven for feeling indifferent about HAXC Holdings (Beijing) Co., Ltd.'s (SZSE:300928) P/S ratio of 2.7x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for HAXC Holdings (Beijing)

How HAXC Holdings (Beijing) Has Been Performing

HAXC Holdings (Beijing) certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on HAXC Holdings (Beijing).

Is There Some Revenue Growth Forecasted For HAXC Holdings (Beijing)?

There's an inherent assumption that a company should be matching the industry for P/S ratios like HAXC Holdings (Beijing)'s to be considered reasonable.

Retrospectively, the last year delivered an exceptional 41% gain to the company's top line. The latest three year period has also seen a 19% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 47% per year during the coming three years according to the one analyst following the company. With the industry only predicted to deliver 7.0% each year, the company is positioned for a stronger revenue result.

In light of this, it's curious that HAXC Holdings (Beijing)'s P/S sits in line with the majority of other companies. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

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.

Despite enticing revenue growth figures that outpace the industry, HAXC Holdings (Beijing)'s P/S isn't quite what we'd expect. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for HAXC Holdings (Beijing) (1 is significant) you should be aware of.

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.

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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.