Ningbo Ronbay New Energy Technology Co.,Ltd. (SHSE:688005) Held Back By Insufficient Growth Even After Shares Climb 34%

Ningbo Ronbay New Energy Technology Co.,Ltd. (SHSE:688005) shares have had a really impressive month, gaining 34% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 38% over that time.

Even after such a large jump in price, it would still be understandable if you think Ningbo Ronbay New Energy TechnologyLtd is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.8x, considering almost half the companies in China's Electrical industry have P/S ratios above 2.2x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Ningbo Ronbay New Energy TechnologyLtd

How Ningbo Ronbay New Energy TechnologyLtd Has Been Performing

Ningbo Ronbay New Energy TechnologyLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.

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.

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

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

Retrospectively, the last year delivered a frustrating 47% decrease to the company's top line. Even so, admirably revenue has lifted 171% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 10.0% during the coming year according to the nine analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 23%, which is noticeably more attractive.

With this in consideration, its clear as to why Ningbo Ronbay New Energy TechnologyLtd's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Ningbo Ronbay New Energy TechnologyLtd's P/S

The latest share price surge wasn't enough to lift Ningbo Ronbay New Energy TechnologyLtd's P/S close to the industry median. 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.

As we suspected, our examination of Ningbo Ronbay New Energy TechnologyLtd's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 3 warning signs for Ningbo Ronbay New Energy TechnologyLtd that we have uncovered.

If these risks are making you reconsider your opinion on Ningbo Ronbay New Energy TechnologyLtd, 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.