Zhejiang Risun Intelligent Technology Co.,Ltd (SHSE:688215) Stock Rockets 34% But Many Are Still Ignoring The Company

Zhejiang Risun Intelligent Technology Co.,Ltd (SHSE:688215) 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 23% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Zhejiang Risun Intelligent TechnologyLtd's P/S ratio of 2.7x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in China is also close to 2.6x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Zhejiang Risun Intelligent TechnologyLtd

How Zhejiang Risun Intelligent TechnologyLtd Has Been Performing

The revenue growth achieved at Zhejiang Risun Intelligent TechnologyLtd over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. Those who are bullish on Zhejiang Risun Intelligent TechnologyLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Zhejiang Risun Intelligent TechnologyLtd will help you shine a light on its historical performance.

How Is Zhejiang Risun Intelligent TechnologyLtd's Revenue Growth Trending?

Zhejiang Risun Intelligent TechnologyLtd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 8.8%. This was backed up an excellent period prior to see revenue up by 152% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 23% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Zhejiang Risun Intelligent TechnologyLtd's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Its shares have lifted substantially and now Zhejiang Risun Intelligent TechnologyLtd's P/S is back within range of the industry median. 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.

We've established that Zhejiang Risun Intelligent TechnologyLtd currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 2 warning signs for Zhejiang Risun Intelligent TechnologyLtd you should be aware of, and 1 of them is a bit unpleasant.

If these risks are making you reconsider your opinion on Zhejiang Risun Intelligent 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.