Jiangsu Wuyang Parking Industry Group Co.,Ltd. (SZSE:300420) Surges 26% Yet Its Low P/S Is No Reason For Excitement

Jiangsu Wuyang Parking Industry Group Co.,Ltd. (SZSE:300420) shareholders are no doubt pleased to see that the share price has bounced 26% 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 15% in the last twelve months.

Even after such a large jump in price, Jiangsu Wuyang Parking Industry GroupLtd's price-to-sales (or "P/S") ratio of 2x 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 2.7x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Jiangsu Wuyang Parking Industry GroupLtd

How Has Jiangsu Wuyang Parking Industry GroupLtd Performed Recently?

For example, consider that Jiangsu Wuyang Parking Industry GroupLtd's financial performance has been pretty ordinary lately as revenue growth is non-existent. It might be that many expect the uninspiring revenue performance to worsen, which has repressed the P/S. If not, then existing shareholders may be feeling optimistic about the future direction of the share price.

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 Jiangsu Wuyang Parking Industry GroupLtd's earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

Jiangsu Wuyang Parking Industry GroupLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. That's essentially a continuation of what we've seen over the last three years, as its revenue growth has been virtually non-existent for that entire period. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.

Comparing that to the industry, which is predicted to deliver 27% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Jiangsu Wuyang Parking Industry GroupLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Jiangsu Wuyang Parking Industry GroupLtd's P/S

Despite Jiangsu Wuyang Parking Industry GroupLtd's share price climbing recently, its P/S still lags most other companies. 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.

In line with expectations, Jiangsu Wuyang Parking Industry GroupLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Jiangsu Wuyang Parking Industry GroupLtd (including 1 which makes us a bit uncomfortable).

If you're unsure about the strength of Jiangsu Wuyang Parking Industry GroupLtd'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.