A Piece Of The Puzzle Missing From Luoyang Xinqianglian Slewing Bearing Co., Ltd.'s (SZSE:300850) 26% Share Price Climb

Luoyang Xinqianglian Slewing Bearing Co., Ltd. (SZSE:300850) shareholders would be excited to see that the share price has had a great month, posting a 26% gain and recovering from prior weakness. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Luoyang Xinqianglian Slewing Bearing's P/S ratio of 3.4x, since the median price-to-sales (or "P/S") ratio for the Machinery industry in China is about the same. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Luoyang Xinqianglian Slewing Bearing

What Does Luoyang Xinqianglian Slewing Bearing's P/S Mean For Shareholders?

Luoyang Xinqianglian Slewing Bearing hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

Keen to find out how analysts think Luoyang Xinqianglian Slewing Bearing's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Some Revenue Growth Forecasted For Luoyang Xinqianglian Slewing Bearing?

The only time you'd be comfortable seeing a P/S like Luoyang Xinqianglian Slewing Bearing's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 3.4% decrease to the company's top line. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 30% as estimated by the only analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 22%, which is noticeably less attractive.

In light of this, it's curious that Luoyang Xinqianglian Slewing Bearing's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Its shares have lifted substantially and now Luoyang Xinqianglian Slewing Bearing's P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Looking at Luoyang Xinqianglian Slewing Bearing's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Luoyang Xinqianglian Slewing Bearing with six simple checks on some of these key factors.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.