China Aluminum International Engineering Corporation Limited's (SHSE:601068) Business And Shares Still Trailing The Industry

China Aluminum International Engineering Corporation Limited's (SHSE:601068) price-to-sales (or "P/S") ratio of 0.6x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Construction industry in China have P/S ratios greater than 1.1x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for China Aluminum International Engineering

What Does China Aluminum International Engineering's P/S Mean For Shareholders?

We'd have to say that with no tangible growth over the last year, China Aluminum International Engineering's revenue has been unimpressive. Perhaps the market believes the recent lacklustre revenue performance is a sign of future underperformance relative to industry peers, hurting the P/S. 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 out of favour.

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

Is There Any Revenue Growth Forecasted For China Aluminum International Engineering?

The only time you'd be truly comfortable seeing a P/S as low as China Aluminum International Engineering's is when the company's growth is on track to lag the industry.

If we review the last year of revenue, the company posted a result that saw barely any deviation from a year ago. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 4.5% overall from three years ago. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 15% shows it's an unpleasant look.

In light of this, it's understandable that China Aluminum International Engineering's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does China Aluminum International Engineering's P/S Mean For Investors?

Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

It's no surprise that China Aluminum International Engineering 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for China Aluminum International Engineering you should be aware of.

If you're unsure about the strength of China Aluminum International Engineering's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.