Little Excitement Around FAW Jiefang Group Co.,Ltd's (SZSE:000800) Revenues

FAW Jiefang Group Co.,Ltd's (SZSE:000800) price-to-sales (or "P/S") ratio of 0.5x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Machinery industry in China have P/S ratios greater than 2.4x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for FAW Jiefang GroupLtd

What Does FAW Jiefang GroupLtd's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, FAW Jiefang GroupLtd has been doing relatively well. 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 potentially pick up some stock while it's out of favour.

Keen to find out how analysts think FAW Jiefang GroupLtd'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 FAW Jiefang GroupLtd?

In order to justify its P/S ratio, FAW Jiefang GroupLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 85% gain to the company's top line. Despite this strong recent growth, it's still struggling to catch up as its three-year revenue frustratingly shrank by 47% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to climb by 14% during the coming year according to the two analysts following the company. That's shaping up to be materially lower than the 22% growth forecast for the broader industry.

With this information, we can see why FAW Jiefang GroupLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

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 expected, our analysis of FAW Jiefang GroupLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for FAW Jiefang GroupLtd that you need to be mindful of.

If you're unsure about the strength of FAW Jiefang GroupLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.