Revenues Not Telling The Story For Qinhuangdao Tianqin Equipment Manufacturing Co.,Ltd. (SZSE:300922) After Shares Rise 26%

Those holding Qinhuangdao Tianqin Equipment Manufacturing Co.,Ltd. (SZSE:300922) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 32% in the last twelve months.

Following the firm bounce in price, Qinhuangdao Tianqin Equipment ManufacturingLtd's price-to-sales (or "P/S") ratio of 14.1x might make it look like a strong sell right now compared to other companies in the Aerospace & Defense industry in China, where around half of the companies have P/S ratios below 7.3x and even P/S below 3x are quite common. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Qinhuangdao Tianqin Equipment ManufacturingLtd

How Has Qinhuangdao Tianqin Equipment ManufacturingLtd Performed Recently?

As an illustration, revenue has deteriorated at Qinhuangdao Tianqin Equipment ManufacturingLtd over the last year, which is not ideal at all. One possibility is that the P/S is high because investors think the company will still do enough to outperform the broader industry in the near future. If not, then existing shareholders may be quite nervous about the viability 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 Qinhuangdao Tianqin Equipment ManufacturingLtd's earnings, revenue and cash flow.

How Is Qinhuangdao Tianqin Equipment ManufacturingLtd's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Qinhuangdao Tianqin Equipment ManufacturingLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 27% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 40% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 48% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's alarming that Qinhuangdao Tianqin Equipment ManufacturingLtd'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. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What Does Qinhuangdao Tianqin Equipment ManufacturingLtd's P/S Mean For Investors?

Qinhuangdao Tianqin Equipment ManufacturingLtd's P/S has grown nicely over the last month thanks to a handy boost in the share price. 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.

Our examination of Qinhuangdao Tianqin Equipment ManufacturingLtd revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. Should recent medium-term revenue trends persist, it would pose a significant risk to existing shareholders' investments and prospective investors will have a hard time accepting the current value of the stock.

Before you take the next step, you should know about the 5 warning signs for Qinhuangdao Tianqin Equipment ManufacturingLtd (2 don't sit too well with us!) that we have uncovered.

If you're unsure about the strength of Qinhuangdao Tianqin Equipment ManufacturingLtd'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.