There's No Escaping Ningbo Lehui International Engineering Equipment Co.,Ltd's (SHSE:603076) Muted Revenues Despite A 31% Share Price Rise

Those holding Ningbo Lehui International Engineering Equipment Co.,Ltd (SHSE:603076) shares would be relieved that the share price has rebounded 31% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 45% over that time.

Even after such a large jump in price, Ningbo Lehui International Engineering EquipmentLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2x, considering almost half of all companies in the Machinery industry in China have P/S ratios greater than 2.7x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Ningbo Lehui International Engineering EquipmentLtd

How Has Ningbo Lehui International Engineering EquipmentLtd Performed Recently?

Ningbo Lehui International Engineering EquipmentLtd has been doing a good job lately as it's been growing revenue at a solid pace. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Ningbo Lehui International Engineering EquipmentLtd?

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

If we review the last year of revenue growth, the company posted a terrific increase of 19%. Pleasingly, revenue has also lifted 80% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 27% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Ningbo Lehui International Engineering EquipmentLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Final Word

Despite Ningbo Lehui International Engineering EquipmentLtd'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.

Our examination of Ningbo Lehui International Engineering EquipmentLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 3 warning signs for Ningbo Lehui International Engineering EquipmentLtd (1 is significant!) that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.