Spic Yuanda Environmental-Protection Co.,Ltd. (SHSE:600292) Held Back By Insufficient Growth Even After Shares Climb 36%

Spic Yuanda Environmental-Protection Co.,Ltd. (SHSE:600292) shareholders have had their patience rewarded with a 36% share price jump in the last month. Taking a wider view, although not as strong as the last month, the full year gain of 13% is also fairly reasonable.

In spite of the firm bounce in price, Spic Yuanda Environmental-ProtectionLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.2x, considering almost half of all companies in the Commercial Services industry in China have P/S ratios greater than 2.8x and even P/S higher than 6x 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 Spic Yuanda Environmental-ProtectionLtd

What Does Spic Yuanda Environmental-ProtectionLtd's P/S Mean For Shareholders?

The recent revenue growth at Spic Yuanda Environmental-ProtectionLtd would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. If that doesn't eventuate, then existing shareholders may have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Spic Yuanda Environmental-ProtectionLtd will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Spic Yuanda Environmental-ProtectionLtd?

In order to justify its P/S ratio, Spic Yuanda Environmental-ProtectionLtd would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.0% last year. Still, revenue has barely risen at all in aggregate from three years ago, which is not ideal. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Comparing that to the industry, which is predicted to deliver 29% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that Spic Yuanda Environmental-ProtectionLtd's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Spic Yuanda Environmental-ProtectionLtd's P/S?

Despite Spic Yuanda Environmental-ProtectionLtd's share price climbing recently, its P/S still lags most other companies. 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.

Our examination of Spic Yuanda Environmental-ProtectionLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Spic Yuanda Environmental-ProtectionLtd that you should be aware of.

If you're unsure about the strength of Spic Yuanda Environmental-ProtectionLtd'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.