There's No Escaping Jiangsu Hagong Intelligent Robot Co., Ltd's (SZSE:000584) Muted Revenues Despite A 37% Share Price Rise

Jiangsu Hagong Intelligent Robot Co., Ltd (SZSE:000584) shareholders are no doubt pleased to see that the share price has bounced 37% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 64% share price drop in the last twelve months.

In spite of the firm bounce in price, considering around half the companies operating in China's Machinery industry have price-to-sales ratios (or "P/S") above 2.4x, you may still consider Jiangsu Hagong Intelligent Robot as an solid investment opportunity with its 0.6x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Jiangsu Hagong Intelligent Robot

How Jiangsu Hagong Intelligent Robot Has Been Performing

The revenue growth achieved at Jiangsu Hagong Intelligent Robot over the last year would be more than acceptable for most companies. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. Those who are bullish on Jiangsu Hagong Intelligent Robot will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jiangsu Hagong Intelligent Robot will help you shine a light on its historical performance.

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

Jiangsu Hagong Intelligent Robot'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 grew revenue by an impressive 17% last year. Revenue has also lifted 22% in aggregate from three years ago, mostly 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 22% shows it's noticeably less attractive.

In light of this, it's understandable that Jiangsu Hagong Intelligent Robot'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.

The Key Takeaway

Jiangsu Hagong Intelligent Robot's 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.

As we suspected, our examination of Jiangsu Hagong Intelligent Robot revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you take the next step, you should know about the 2 warning signs for Jiangsu Hagong Intelligent Robot that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

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