Investors Continue Waiting On Sidelines For Ningbo Ronbay New Energy Technology Co.,Ltd. (SHSE:688005)

Ningbo Ronbay New Energy Technology Co.,Ltd.'s (SHSE:688005) price-to-sales (or "P/S") ratio of 1.1x might make it look like a buy right now compared to the Electrical industry in China, where around half of the companies have P/S ratios above 2.6x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Ningbo Ronbay New Energy TechnologyLtd

How Has Ningbo Ronbay New Energy TechnologyLtd Performed Recently?

Ningbo Ronbay New Energy TechnologyLtd hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still 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 analyst estimates for the company? Then our free report on Ningbo Ronbay New Energy TechnologyLtd will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Ningbo Ronbay New Energy TechnologyLtd?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Ningbo Ronbay New Energy TechnologyLtd's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 48%. Even so, admirably revenue has lifted 100% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 26% as estimated by the ten analysts watching the company. With the industry predicted to deliver 26% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that Ningbo Ronbay New Energy TechnologyLtd's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

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.

We've seen that Ningbo Ronbay New Energy TechnologyLtd currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Before you settle on your opinion, we've discovered 3 warning signs for Ningbo Ronbay New Energy TechnologyLtd (1 is a bit unpleasant!) that you should be aware 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.