Anhui Yuanchen Environmental Protection Science&Technology Co.,Ltd. (SHSE:688659) Shares Fly 37% But Investors Aren't Buying For Growth

The Anhui Yuanchen Environmental Protection Science&Technology Co.,Ltd. (SHSE:688659) share price has done very well over the last month, posting an excellent gain of 37%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 37% over that time.

Even after such a large jump in price, Anhui Yuanchen Environmental Protection Science&TechnologyLtd's price-to-sales (or "P/S") ratio of 1.9x 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 2.6x and even P/S above 5x are quite common. 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 Anhui Yuanchen Environmental Protection Science&TechnologyLtd

What Does Anhui Yuanchen Environmental Protection Science&TechnologyLtd's Recent Performance Look Like?

Anhui Yuanchen Environmental Protection Science&TechnologyLtd has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Anhui Yuanchen Environmental Protection Science&TechnologyLtd's earnings, revenue and cash flow.

How Is Anhui Yuanchen Environmental Protection Science&TechnologyLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Anhui Yuanchen Environmental Protection Science&TechnologyLtd's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. Revenue has also lifted 20% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 23% shows it's noticeably less attractive.

In light of this, it's understandable that Anhui Yuanchen Environmental Protection Science&TechnologyLtd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Anhui Yuanchen Environmental Protection Science&TechnologyLtd's P/S Mean For Investors?

Anhui Yuanchen Environmental Protection Science&TechnologyLtd's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

In line with expectations, Anhui Yuanchen Environmental Protection Science&TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Anhui Yuanchen Environmental Protection Science&TechnologyLtd that you need to be mindful of.

If these risks are making you reconsider your opinion on Anhui Yuanchen Environmental Protection Science&TechnologyLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.