Conch (Anhui) Energy Saving and Environment Protection New Material Co., Ltd.'s (SZSE:000619) Shares Bounce 26% But Its Business Still Trails The Industry

Conch (Anhui) Energy Saving and Environment Protection New Material Co., Ltd. (SZSE:000619) shares have continued their recent momentum with a 26% gain in the last month alone. Notwithstanding the latest gain, the annual share price return of 4.0% isn't as impressive.

In spite of the firm bounce in price, Conch (Anhui) Energy Saving and Environment Protection New Material may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.5x, considering almost half of all companies in the Building industry in China have P/S ratios greater than 1.9x and even P/S higher than 4x 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.

See our latest analysis for Conch (Anhui) Energy Saving and Environment Protection New Material

How Conch (Anhui) Energy Saving and Environment Protection New Material Has Been Performing

It looks like revenue growth has deserted Conch (Anhui) Energy Saving and Environment Protection New Material recently, which is not something to boast about. One possibility is that the P/S is low because investors think this benign revenue growth rate will likely underperform the broader industry in the near future. Those who are bullish on Conch (Anhui) Energy Saving and Environment Protection New Material will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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 Conch (Anhui) Energy Saving and Environment Protection New Material's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Conch (Anhui) Energy Saving and Environment Protection New Material's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Fortunately, a few good years before that means that it was still able to grow revenue by 12% in total over the last three years. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Comparing that to the industry, which is predicted to deliver 21% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Conch (Anhui) Energy Saving and Environment Protection New Material is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Conch (Anhui) Energy Saving and Environment Protection New Material's P/S Mean For Investors?

Conch (Anhui) Energy Saving and Environment Protection New Material's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

In line with expectations, Conch (Anhui) Energy Saving and Environment Protection New Material 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. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Plus, you should also learn about these 2 warning signs we've spotted with Conch (Anhui) Energy Saving and Environment Protection New Material (including 1 which is concerning).

If these risks are making you reconsider your opinion on Conch (Anhui) Energy Saving and Environment Protection New Material, 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.