Stock Analysis

Even With A 33% Surge, Cautious Investors Are Not Rewarding Ningbo Zhenyu Technology Co., Ltd.'s (SZSE:300953) Performance Completely

SZSE:300953
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Ningbo Zhenyu Technology Co., Ltd. (SZSE:300953) shares have continued their recent momentum with a 33% gain in the last month alone. The annual gain comes to 102% following the latest surge, making investors sit up and take notice.

In spite of the firm bounce in price, Ningbo Zhenyu Technology may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.6x, considering almost half of all companies in the Machinery industry in China have P/S ratios greater than 2.7x and even P/S higher than 5x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Ningbo Zhenyu Technology

ps-multiple-vs-industry
SZSE:300953 Price to Sales Ratio vs Industry January 14th 2025

What Does Ningbo Zhenyu Technology's Recent Performance Look Like?

Recent times have been advantageous for Ningbo Zhenyu Technology as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Ningbo Zhenyu Technology will help you uncover what's on the horizon.

How Is Ningbo Zhenyu Technology's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Ningbo Zhenyu Technology's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 12%. Pleasingly, revenue has also lifted 179% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 20% per year over the next three years. With the industry predicted to deliver 19% growth per annum, the company is positioned for a comparable revenue result.

With this information, we find it odd that Ningbo Zhenyu Technology is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Ningbo Zhenyu Technology's P/S Mean For Investors?

Ningbo Zhenyu Technology's stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Ningbo Zhenyu Technology's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It is also worth noting that we have found 3 warning signs for Ningbo Zhenyu Technology (2 are concerning!) that you need to take into consideration.

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.

Valuation is complex, but we're here to simplify it.

Discover if Ningbo Zhenyu Technology might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.