There's No Escaping Suzhou Kelida Building& Decoration Co.,Ltd.'s (SHSE:603828) Muted Revenues Despite A 25% Share Price Rise

The Suzhou Kelida Building& Decoration Co.,Ltd. (SHSE:603828) share price has done very well over the last month, posting an excellent gain of 25%. Looking back a bit further, it's encouraging to see the stock is up 36% in the last year.

Although its price has surged higher, Suzhou Kelida Building& DecorationLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Building industry in China have P/S ratios greater than 1.9x and even P/S higher than 4x 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 Suzhou Kelida Building& DecorationLtd

How Has Suzhou Kelida Building& DecorationLtd Performed Recently?

Revenue has risen firmly for Suzhou Kelida Building& DecorationLtd recently, which is pleasing to see. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. 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 Suzhou Kelida Building& DecorationLtd will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Suzhou Kelida Building& DecorationLtd?

Suzhou Kelida Building& DecorationLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered an exceptional 19% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 8.7% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 15% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Suzhou Kelida Building& DecorationLtd is trading at a P/S lower than the industry. 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 Suzhou Kelida Building& DecorationLtd's P/S?

Despite Suzhou Kelida Building& DecorationLtd'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.

It's no surprise that Suzhou Kelida Building& DecorationLtd maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. 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.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Suzhou Kelida Building& DecorationLtd that 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.