Dalian Haosen Intelligent Manufacturing Co., Ltd. (SHSE:688529) Held Back By Insufficient Growth Even After Shares Climb 38%

Despite an already strong run, Dalian Haosen Intelligent Manufacturing Co., Ltd. (SHSE:688529) shares have been powering on, with a gain of 38% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.

Even after such a large jump in price, Dalian Haosen Intelligent Manufacturing's price-to-sales (or "P/S") ratio of 1.5x might still make it look like a buy right now compared to the Machinery industry in China, where around half of the companies have P/S ratios above 3.2x and even P/S above 6x 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.

View our latest analysis for Dalian Haosen Intelligent Manufacturing

What Does Dalian Haosen Intelligent Manufacturing's Recent Performance Look Like?

Recent revenue growth for Dalian Haosen Intelligent Manufacturing has been in line with the industry. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could 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 Dalian Haosen Intelligent Manufacturing.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Dalian Haosen Intelligent Manufacturing's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.0% last year. The latest three year period has also seen an excellent 101% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 16% over the next year. That's shaping up to be materially lower than the 25% growth forecast for the broader industry.

In light of this, it's understandable that Dalian Haosen Intelligent Manufacturing's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

The latest share price surge wasn't enough to lift Dalian Haosen Intelligent Manufacturing's P/S close to the industry median. 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.

As we suspected, our examination of Dalian Haosen Intelligent Manufacturing's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Before you take the next step, you should know about the 2 warning signs for Dalian Haosen Intelligent Manufacturing that we have uncovered.

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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