A Piece Of The Puzzle Missing From Chengdu Xinzhu Road&Bridge Machinery Co.,LTD's (SZSE:002480) 28% Share Price Climb

Despite an already strong run, Chengdu Xinzhu Road&Bridge Machinery Co.,LTD (SZSE:002480) shares have been powering on, with a gain of 28% in the last thirty days. Looking further back, the 11% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, Chengdu Xinzhu Road&Bridge MachineryLTD's price-to-sales (or "P/S") ratio of 1.3x might still make it look like a buy right now compared to the Machinery industry in China, where around half of the companies have P/S ratios above 3.3x and even P/S above 6x are quite common. 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 Chengdu Xinzhu Road&Bridge MachineryLTD

How Chengdu Xinzhu Road&Bridge MachineryLTD Has Been Performing

Chengdu Xinzhu Road&Bridge MachineryLTD certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. 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.

Although there are no analyst estimates available for Chengdu Xinzhu Road&Bridge MachineryLTD, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Chengdu Xinzhu Road&Bridge MachineryLTD's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 63%. The strong recent performance means it was also able to grow revenue by 87% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 26% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this in consideration, we find it intriguing that Chengdu Xinzhu Road&Bridge MachineryLTD's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On Chengdu Xinzhu Road&Bridge MachineryLTD's P/S

Despite Chengdu Xinzhu Road&Bridge MachineryLTD's share price climbing recently, its P/S still lags most other companies. 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.

Our examination of Chengdu Xinzhu Road&Bridge MachineryLTD revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. medium-term

Having said that, be aware Chengdu Xinzhu Road&Bridge MachineryLTD is showing 1 warning sign in our investment analysis, you should know about.

If you're unsure about the strength of Chengdu Xinzhu Road&Bridge MachineryLTD'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.