A Piece Of The Puzzle Missing From Beijing LeiKe Defense Technology Co., Ltd.'s (SZSE:002413) 35% Share Price Climb

Beijing LeiKe Defense Technology Co., Ltd. (SZSE:002413) shareholders have had their patience rewarded with a 35% share price jump in the last month. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

Even after such a large jump in price, Beijing LeiKe Defense Technology may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 5.1x, since almost half of all companies in the Aerospace & Defense industry in China have P/S ratios greater than 7.1x and even P/S higher than 12x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Beijing LeiKe Defense Technology

What Does Beijing LeiKe Defense Technology's Recent Performance Look Like?

Beijing LeiKe Defense Technology could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Beijing LeiKe Defense Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

Beijing LeiKe Defense Technology'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, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.2%. This means it has also seen a slide in revenue over the longer-term as revenue is down 12% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 37% as estimated by the only analyst watching the company. That's shaping up to be similar to the 39% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Beijing LeiKe Defense Technology's P/S is lagging behind its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Beijing LeiKe Defense Technology's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Beijing LeiKe Defense Technology's P/S close to the industry median. 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.

We've seen that Beijing LeiKe Defense Technology currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Beijing LeiKe Defense Technology with six simple checks.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.