Cautious Investors Not Rewarding Beijing LeiKe Defense Technology Co., Ltd.'s (SZSE:002413) Performance Completely

With a price-to-sales (or "P/S") ratio of 3.9x Beijing LeiKe Defense Technology Co., Ltd. (SZSE:002413) may be sending bullish signals at the moment, given that almost half of all the Aerospace & Defense companies in China have P/S ratios greater than 6.6x and even P/S higher than 11x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Beijing LeiKe Defense Technology

How Beijing LeiKe Defense Technology Has Been Performing

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.

Is There Any Revenue Growth Forecasted For Beijing LeiKe Defense Technology?

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.

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 6.0%. As a result, revenue from three years ago have also fallen 2.5% 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 66% during the coming year according to the lone analyst following the company. With the industry only predicted to deliver 28%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Beijing LeiKe Defense Technology is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

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.

To us, it seems Beijing LeiKe Defense Technology currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Beijing LeiKe Defense Technology is showing 1 warning sign in our investment analysis, you should know about.

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.

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