Why Investors Shouldn't Be Surprised By AVIC Xi'an Aircraft Industry Group Company Ltd.'s (SZSE:000768) Low P/S

You may think that with a price-to-sales (or "P/S") ratio of 1.8x AVIC Xi'an Aircraft Industry Group Company Ltd. (SZSE:000768) is definitely a stock worth checking out, seeing as almost half of all the Aerospace & Defense companies in China have P/S ratios greater than 6.2x and even P/S above 10x 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 so limited.

Check out our latest analysis for AVIC Xi'an Aircraft Industry Group

What Does AVIC Xi'an Aircraft Industry Group's Recent Performance Look Like?

AVIC Xi'an Aircraft Industry Group's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Keen to find out how analysts think AVIC Xi'an Aircraft Industry Group's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For AVIC Xi'an Aircraft Industry Group?

The only time you'd be truly comfortable seeing a P/S as depressed as AVIC Xi'an Aircraft Industry Group's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.1% last year. The solid recent performance means it was also able to grow revenue by 22% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 22% during the coming year according to the six analysts following the company. That's shaping up to be materially lower than the 28% growth forecast for the broader industry.

In light of this, it's understandable that AVIC Xi'an Aircraft Industry Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On AVIC Xi'an Aircraft Industry Group's P/S

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.

As we suspected, our examination of AVIC Xi'an Aircraft Industry Group's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. You can assess many of the main risks through our free balance sheet analysis for AVIC Xi'an Aircraft Industry Group with six simple checks.

If these risks are making you reconsider your opinion on AVIC Xi'an Aircraft Industry Group, 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.

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