Subdued Growth No Barrier To Shenyang Yuanda Intellectual Industry Group Co.,Ltd (SZSE:002689) With Shares Advancing 26%

Shenyang Yuanda Intellectual Industry Group Co.,Ltd (SZSE:002689) shareholders have had their patience rewarded with a 26% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 31% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Shenyang Yuanda Intellectual Industry GroupLtd's P/S ratio of 2.3x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in China is also close to 2.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

See our latest analysis for Shenyang Yuanda Intellectual Industry GroupLtd

What Does Shenyang Yuanda Intellectual Industry GroupLtd's P/S Mean For Shareholders?

The revenue growth achieved at Shenyang Yuanda Intellectual Industry GroupLtd over the last year would be more than acceptable for most companies. One possibility is that the P/S is moderate because investors think this respectable revenue growth might not be enough to outperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders probably aren't too pessimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Shenyang Yuanda Intellectual Industry GroupLtd will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Shenyang Yuanda Intellectual Industry GroupLtd?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Shenyang Yuanda Intellectual Industry GroupLtd's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 13%. The latest three year period has also seen an excellent 35% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that Shenyang Yuanda Intellectual Industry GroupLtd's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Shenyang Yuanda Intellectual Industry GroupLtd's P/S

Its shares have lifted substantially and now Shenyang Yuanda Intellectual Industry GroupLtd's P/S is back within range of the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Shenyang Yuanda Intellectual Industry GroupLtd's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Plus, you should also learn about these 2 warning signs we've spotted with Shenyang Yuanda Intellectual Industry GroupLtd.

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.