The Market Lifts Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. (SZSE:000530) Shares 33% But It Can Do More

Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. (SZSE:000530) shareholders are no doubt pleased to see that the share price has bounced 33% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

Although its price has surged higher, Bingshan Refrigeration & Heat Transfer Technologies may still 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 Machinery industry in China have P/S ratios greater than 2.8x and even P/S higher than 5x aren't out of the ordinary. 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 Bingshan Refrigeration & Heat Transfer Technologies

What Does Bingshan Refrigeration & Heat Transfer Technologies' Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Bingshan Refrigeration & Heat Transfer Technologies has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite 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 Bingshan Refrigeration & Heat Transfer Technologies' earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Bingshan Refrigeration & Heat Transfer Technologies?

Bingshan Refrigeration & Heat Transfer Technologies' P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 87%. Pleasingly, revenue has also lifted 160% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

This is in contrast to the rest of the industry, which is expected to grow by 27% over the next year, materially lower than the company's recent medium-term annualised growth rates.

With this in mind, we find it intriguing that Bingshan Refrigeration & Heat Transfer Technologies' P/S isn't as high compared to that of its industry peers. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Bingshan Refrigeration & Heat Transfer Technologies' P/S Mean For Investors?

Bingshan Refrigeration & Heat Transfer Technologies' stock price has surged recently, but its but its P/S still remains modest. 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.

We're very surprised to see Bingshan Refrigeration & Heat Transfer Technologies currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. It appears many are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Bingshan Refrigeration & Heat Transfer Technologies (1 doesn't sit too well with us!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Bingshan Refrigeration & Heat Transfer Technologies, 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.