The Market Lifts Guangdong Lyric Robot Automation Co.,Ltd. (SHSE:688499) Shares 25% But It Can Do More

Guangdong Lyric Robot Automation Co.,Ltd. (SHSE:688499) shares have had a really impressive month, gaining 25% after a shaky period beforehand. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

In spite of the firm bounce in price, Guangdong Lyric Robot AutomationLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.8x, since almost half of all companies in the Machinery industry in China have P/S ratios greater than 3.5x and even P/S higher than 7x are not unusual. 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 Guangdong Lyric Robot AutomationLtd

What Does Guangdong Lyric Robot AutomationLtd's P/S Mean For Shareholders?

Guangdong Lyric Robot AutomationLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. 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 Guangdong Lyric Robot AutomationLtd.

How Is Guangdong Lyric Robot AutomationLtd's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Guangdong Lyric Robot AutomationLtd'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 45%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 18% overall rise in revenue. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 26% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 23% growth forecast for the broader industry.

In light of this, it's peculiar that Guangdong Lyric Robot AutomationLtd's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Guangdong Lyric Robot AutomationLtd's stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

A look at Guangdong Lyric Robot AutomationLtd'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. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Plus, you should also learn about these 3 warning signs we've spotted with Guangdong Lyric Robot AutomationLtd (including 2 which are a bit concerning).

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.