Even With A 25% Surge, Cautious Investors Are Not Rewarding Ningbo Ronbay New Energy Technology Co.,Ltd.'s (SHSE:688005) Performance Completely

Despite an already strong run, Ningbo Ronbay New Energy Technology Co.,Ltd. (SHSE:688005) shares have been powering on, with a gain of 25% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.3% over the last year.

Although its price has surged higher, Ningbo Ronbay New Energy TechnologyLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.2x, considering almost half of all companies in the Electrical industry in China have P/S ratios greater than 2.4x 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 Ronbay New Energy TechnologyLtd

What Does Ningbo Ronbay New Energy TechnologyLtd's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Ningbo Ronbay New Energy TechnologyLtd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Ningbo Ronbay New Energy TechnologyLtd.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Ningbo Ronbay New Energy TechnologyLtd would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 48%. Even so, admirably revenue has lifted 100% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next year should generate growth of 26% as estimated by the ten analysts watching the company. That's shaping up to be similar to the 25% growth forecast for the broader industry.

In light of this, it's peculiar that Ningbo Ronbay New Energy TechnologyLtd's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Ningbo Ronbay New Energy TechnologyLtd's P/S?

Ningbo Ronbay New Energy TechnologyLtd's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Ningbo Ronbay New Energy TechnologyLtd's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Ningbo Ronbay New Energy TechnologyLtd (1 can't be ignored!) that you need to be mindful of.

If you're unsure about the strength of Ningbo Ronbay New Energy TechnologyLtd'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.