More Unpleasant Surprises Could Be In Store For Qingdao Hi-Tech Moulds & Plastics Technology Co., Ltd.'s (SZSE:301022) Shares After Tumbling 27%

Qingdao Hi-Tech Moulds & Plastics Technology Co., Ltd. (SZSE:301022) shareholders won't be pleased to see that the share price has had a very rough month, dropping 27% and undoing the prior period's positive performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.

In spite of the heavy fall in price, it's still not a stretch to say that Qingdao Hi-Tech Moulds & Plastics Technology's price-to-sales (or "P/S") ratio of 2.6x right now seems quite "middle-of-the-road" compared to the Auto Components industry in China, where the median P/S ratio is around 2.2x. 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.

See our latest analysis for Qingdao Hi-Tech Moulds & Plastics Technology

What Does Qingdao Hi-Tech Moulds & Plastics Technology's Recent Performance Look Like?

Qingdao Hi-Tech Moulds & Plastics Technology has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Qingdao Hi-Tech Moulds & Plastics Technology's earnings, revenue and cash flow.

How Is Qingdao Hi-Tech Moulds & Plastics Technology's Revenue Growth Trending?

In order to justify its P/S ratio, Qingdao Hi-Tech Moulds & Plastics Technology would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an excellent 32% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 26% shows it's noticeably less attractive.

In light of this, it's curious that Qingdao Hi-Tech Moulds & Plastics Technology's P/S sits in line with the majority of other companies. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Qingdao Hi-Tech Moulds & Plastics Technology's P/S Mean For Investors?

Following Qingdao Hi-Tech Moulds & Plastics Technology's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

We've established that Qingdao Hi-Tech Moulds & Plastics Technology's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

We don't want to rain on the parade too much, but we did also find 5 warning signs for Qingdao Hi-Tech Moulds & Plastics Technology (4 don't sit too well with us!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Qingdao Hi-Tech Moulds & Plastics Technology, 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.