Revenues Working Against Yangzhou Yaxing Motor Coach Co., Ltd.'s (SHSE:600213) Share Price

Yangzhou Yaxing Motor Coach Co., Ltd.'s (SHSE:600213) price-to-sales (or "P/S") ratio of 1.6x might make it look like a buy right now compared to the Machinery industry in China, where around half of the companies have P/S ratios above 2.7x and even P/S above 5x are quite common. 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 Yangzhou Yaxing Motor Coach

What Does Yangzhou Yaxing Motor Coach's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Yangzhou Yaxing Motor Coach over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on Yangzhou Yaxing Motor Coach will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Yangzhou Yaxing Motor Coach, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Yangzhou Yaxing Motor Coach?

In order to justify its P/S ratio, Yangzhou Yaxing Motor Coach would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 1.3% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 40% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 28% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why Yangzhou Yaxing Motor Coach's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What We Can Learn From Yangzhou Yaxing Motor Coach's P/S?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

It's no surprise that Yangzhou Yaxing Motor Coach maintains its low P/S off the back of its sliding revenue over the medium-term. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Yangzhou Yaxing Motor Coach that you should be aware of.

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.