The Market Lifts Beijing Shengtong Printing Co., Ltd (SZSE:002599) Shares 33% But It Can Do More

The Beijing Shengtong Printing Co., Ltd (SZSE:002599) share price has done very well over the last month, posting an excellent gain of 33%. The last month tops off a massive increase of 102% in the last year.

Although its price has surged higher, Beijing Shengtong Printing may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2.5x, considering almost half of all companies in the Commercial Services industry in China have P/S ratios greater than 3.4x and even P/S higher than 6x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Beijing Shengtong Printing

How Beijing Shengtong Printing Has Been Performing

While the industry has experienced revenue growth lately, Beijing Shengtong Printing's revenue has gone into reverse gear, which is not great. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If you still 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.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beijing Shengtong Printing.

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.

Retrospectively, the last year delivered a frustrating 10% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 13% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 31% over the next year. With the industry predicted to deliver 32% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that Beijing Shengtong Printing is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Beijing Shengtong Printing's P/S?

The latest share price surge wasn't enough to lift Beijing Shengtong Printing's P/S close to the industry median. 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.

We've seen that Beijing Shengtong Printing currently trades on a lower than expected P/S since its forecast growth is in line with 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.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Beijing Shengtong Printing (1 is significant!) that you should be aware of before investing here.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.