Hubei Wanrun New Energy Technology Co.,Ltd. (SHSE:688275) Might Not Be As Mispriced As It Looks After Plunging 26%

Hubei Wanrun New Energy Technology Co.,Ltd. (SHSE:688275) shares have retraced a considerable 26% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.

After such a large drop in price, Hubei Wanrun New Energy TechnologyLtd may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, 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. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Hubei Wanrun New Energy TechnologyLtd

How Has Hubei Wanrun New Energy TechnologyLtd Performed Recently?

Hubei Wanrun 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.

Keen to find out how analysts think Hubei Wanrun New Energy TechnologyLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Hubei Wanrun New Energy TechnologyLtd?

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

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 53%. Even so, admirably revenue has lifted 215% 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.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 62% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 25%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Hubei Wanrun New Energy TechnologyLtd's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Hubei Wanrun New Energy TechnologyLtd's P/S

The southerly movements of Hubei Wanrun New Energy TechnologyLtd's shares means its P/S is now sitting at a pretty low level. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Hubei Wanrun New Energy TechnologyLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Hubei Wanrun New Energy TechnologyLtd that you should be aware of.

If you're unsure about the strength of Hubei Wanrun 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.