Beijing LeiKe Defense Technology Co., Ltd. (SZSE:002413) Stock Rockets 28% But Many Are Still Ignoring The Company

Beijing LeiKe Defense Technology Co., Ltd. (SZSE:002413) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 19% in the last twelve months.

Although its price has surged higher, Beijing LeiKe Defense Technology may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4.7x, considering 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 aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Beijing LeiKe Defense Technology

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

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. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beijing LeiKe Defense Technology.

How Is Beijing LeiKe Defense Technology's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Beijing LeiKe Defense Technology's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 27% decrease to the company's top line. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 58% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 48%, which is noticeably less attractive.

With this information, we find it odd that Beijing LeiKe Defense Technology is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Beijing LeiKe Defense Technology's stock price has surged recently, but its but its P/S still remains modest. 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.

Beijing LeiKe Defense Technology's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Beijing LeiKe Defense Technology with six simple checks on some of these key factors.

If you're unsure about the strength of Beijing LeiKe Defense Technology'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.