Improved Revenues Required Before Ligeance Aerospace Technology Co.,Ltd. (SZSE:000697) Stock's 44% Jump Looks Justified

The Ligeance Aerospace Technology Co.,Ltd. (SZSE:000697) share price has done very well over the last month, posting an excellent gain of 44%. Looking back a bit further, it's encouraging to see the stock is up 70% in the last year.

Even after such a large jump in price, Ligeance Aerospace TechnologyLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 4x, since almost half of all companies in the Aerospace & Defense industry in China have P/S ratios greater than 7.4x and even P/S higher than 13x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Ligeance Aerospace TechnologyLtd

How Ligeance Aerospace TechnologyLtd Has Been Performing

Revenue has risen firmly for Ligeance Aerospace TechnologyLtd recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. 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 Ligeance Aerospace TechnologyLtd's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Ligeance Aerospace TechnologyLtd?

In order to justify its P/S ratio, Ligeance Aerospace TechnologyLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 25% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 74% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 40% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Ligeance Aerospace TechnologyLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Ligeance Aerospace TechnologyLtd's P/S Mean For Investors?

Ligeance Aerospace TechnologyLtd's stock price has surged recently, but its but its P/S still remains modest. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

In line with expectations, Ligeance Aerospace TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for Ligeance Aerospace TechnologyLtd (1 is significant!) 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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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.