Zhangjiagang Furui Special Equipment Co., Ltd. (SZSE:300228) Stock Rockets 41% But Many Are Still Ignoring The Company

The Zhangjiagang Furui Special Equipment Co., Ltd. (SZSE:300228) share price has done very well over the last month, posting an excellent gain of 41%. Taking a wider view, although not as strong as the last month, the full year gain of 18% is also fairly reasonable.

In spite of the firm bounce in price, Zhangjiagang Furui Special Equipment may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.4x, considering almost half of all companies in the Machinery industry in China have P/S ratios greater than 2.8x and even P/S higher than 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Zhangjiagang Furui Special Equipment

What Does Zhangjiagang Furui Special Equipment's Recent Performance Look Like?

With revenue growth that's exceedingly strong of late, Zhangjiagang Furui Special Equipment has been doing very well. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on Zhangjiagang Furui Special Equipment will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Zhangjiagang Furui Special Equipment's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For Zhangjiagang Furui Special Equipment?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Zhangjiagang Furui Special Equipment's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 47% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 82% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 23% 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 Zhangjiagang Furui Special Equipment'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.

What Does Zhangjiagang Furui Special Equipment's P/S Mean For Investors?

Zhangjiagang Furui Special Equipment's stock price has surged recently, but its but its P/S still remains modest. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

The fact that Zhangjiagang Furui Special Equipment currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. While recent

You always need to take note of risks, for example - Zhangjiagang Furui Special Equipment has 1 warning sign we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.