TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT Co., LTD. (SZSE:000826) Stock Catapults 38% Though Its Price And Business Still Lag The Industry

The TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT Co., LTD. (SZSE:000826) share price has done very well over the last month, posting an excellent gain of 38%. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 41% in the last twelve months.

Although its price has surged higher, TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's price-to-sales (or "P/S") ratio of 0.5x might still make it look like a buy right now compared to the Commercial Services industry in China, where around half of the companies have P/S ratios above 2.5x and even P/S above 5x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT

How Has TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT Performed Recently?

For example, consider that TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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.

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?

The only time you'd be truly comfortable seeing a P/S as low as TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. This means it has also seen a slide in revenue over the longer-term as revenue is down 35% 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.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 28% shows it's an unpleasant look.

In light of this, it's understandable that TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT's P/S would sit below the majority of other companies. 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 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.

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. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

It is also worth noting that we have found 2 warning signs for TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT (1 makes us a bit uncomfortable!) that you need to take into consideration.

If these risks are making you reconsider your opinion on TUS ENVIRONMENTAL SCIENCE AND TECHNOLOGY DEVELOPMENT, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.