Haibo Heavy Engineering Science and Technology Co., Ltd.'s (SZSE:300517) 28% Price Boost Is Out Of Tune With Revenues

Haibo Heavy Engineering Science and Technology Co., Ltd. (SZSE:300517) shares have continued their recent momentum with a 28% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 33% in the last twelve months.

After such a large jump in price, when almost half of the companies in China's Construction industry have price-to-sales ratios (or "P/S") below 0.9x, you may consider Haibo Heavy Engineering Science and Technology as a stock not worth researching with its 4.8x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Haibo Heavy Engineering Science and Technology

How Has Haibo Heavy Engineering Science and Technology Performed Recently?

As an illustration, revenue has deteriorated at Haibo Heavy Engineering Science and Technology over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Haibo Heavy Engineering Science and Technology will help you shine a light on its historical performance.

Is There Enough Revenue Growth Forecasted For Haibo Heavy Engineering Science and Technology?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Haibo Heavy Engineering Science and Technology's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 25%. The last three years don't look nice either as the company has shrunk revenue by 64% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 13% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's alarming that Haibo Heavy Engineering Science and Technology's P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent revenue trends is likely to weigh heavily on the share price eventually.

What We Can Learn From Haibo Heavy Engineering Science and Technology's P/S?

Shares in Haibo Heavy Engineering Science and Technology have seen a strong upwards swing lately, which has really helped boost its P/S figure. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Haibo Heavy Engineering Science and Technology currently trades on a much higher than expected P/S since its recent revenues have been in decline over the medium-term. Right now we aren't comfortable with the high P/S as this revenue performance is highly unlikely to support such positive sentiment for long. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

Having said that, be aware Haibo Heavy Engineering Science and Technology is showing 4 warning signs in our investment analysis, and 2 of those are concerning.

If these risks are making you reconsider your opinion on Haibo Heavy Engineering Science and Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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