Beijing Shengtong Printing Co., Ltd (SZSE:002599) Soars 35% But It's A Story Of Risk Vs Reward

Beijing Shengtong Printing Co., Ltd (SZSE:002599) shareholders have had their patience rewarded with a 35% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 13% over that time.

Although its price has surged higher, Beijing Shengtong Printing's price-to-sales (or "P/S") ratio of 1.5x 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 2.6x and even P/S above 6x 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.

See our latest analysis for Beijing Shengtong Printing

How Has Beijing Shengtong Printing Performed Recently?

While the industry has experienced revenue growth lately, Beijing Shengtong Printing's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Beijing Shengtong Printing's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Beijing Shengtong Printing's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Beijing Shengtong Printing's is when the company's growth is on track to lag the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.2%. The last three years don't look nice either as the company has shrunk revenue by 9.6% in aggregate. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 31% over the next year. Meanwhile, the rest of the industry is forecast to expand by 29%, which is not materially different.

With this in consideration, we find it intriguing that Beijing Shengtong Printing's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Beijing Shengtong Printing's P/S

Beijing Shengtong Printing's stock price has surged recently, but its but its P/S still remains modest. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It looks to us like the P/S figures for Beijing Shengtong Printing remain low despite growth that is expected to be in line with other companies in the industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

Before you settle on your opinion, we've discovered 1 warning sign for Beijing Shengtong Printing that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.