TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT Co., LTD. (SZSE:000826) Stock Catapults 34% Though Its Price And Business Still Lag The Industry

Those holding TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT Co., LTD. (SZSE:000826) shares would be relieved that the share price has rebounded 34% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 25% over that time.

Even after such a large jump in price, TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's price-to-sales (or "P/S") ratio of 0.7x might still make it look like a strong buy right now compared to the wider Commercial Services industry in China, where around half of the companies have P/S ratios above 2.7x and even P/S above 5x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT

What Does TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's Recent Performance Look Like?

For example, consider that TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

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 TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's earnings, revenue and cash flow.

How Is TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's Revenue Growth Trending?

TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 29%. 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 30% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we are not surprised that TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Key Takeaway

TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

It's no surprise that TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT maintains its low P/S off the back of its sliding revenue over the medium-term. 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.

Plus, you should also learn about this 1 warning sign we've spotted with TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT.

If you're unsure about the strength of TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT'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.