Hunan Baili Engineering Sci&Tech Co.,Ltd (SHSE:603959) Stock Rockets 29% As Investors Are Less Pessimistic Than Expected

Those holding Hunan Baili Engineering Sci&Tech Co.,Ltd (SHSE:603959) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 82% share price drop in the last twelve months.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Hunan Baili Engineering Sci&TechLtd's P/S ratio of 0.5x, since the median price-to-sales (or "P/S") ratio for the Construction industry in China is also close to 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

View our latest analysis for Hunan Baili Engineering Sci&TechLtd

What Does Hunan Baili Engineering Sci&TechLtd's Recent Performance Look Like?

For example, consider that Hunan Baili Engineering Sci&TechLtd's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is moderate because investors think the company might still do enough to be in line with the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Hunan Baili Engineering Sci&TechLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Hunan Baili Engineering Sci&TechLtd's Revenue Growth Trending?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Hunan Baili Engineering Sci&TechLtd's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 45%. Regardless, revenue has managed to lift by a handy 25% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 13% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Hunan Baili Engineering Sci&TechLtd'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. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What Does Hunan Baili Engineering Sci&TechLtd's P/S Mean For Investors?

Its shares have lifted substantially and now Hunan Baili Engineering Sci&TechLtd's P/S is back within range of the industry median. 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.

Our examination of Hunan Baili Engineering Sci&TechLtd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. 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.

Plus, you should also learn about this 1 warning sign we've spotted with Hunan Baili Engineering Sci&TechLtd.

If these risks are making you reconsider your opinion on Hunan Baili Engineering Sci&TechLtd, 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.