Guangdong Yuehai Feeds Group Co.,Ltd. (SZSE:001313) Stock Catapults 27% Though Its Price And Business Still Lag The Industry

Despite an already strong run, Guangdong Yuehai Feeds Group Co.,Ltd. (SZSE:001313) shares have been powering on, with a gain of 27% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 3.7% isn't as attractive.

In spite of the firm bounce in price, given about half the companies operating in China's Food industry have price-to-sales ratios (or "P/S") above 2x, you may still consider Guangdong Yuehai Feeds GroupLtd as an attractive investment with its 1.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Guangdong Yuehai Feeds GroupLtd

What Does Guangdong Yuehai Feeds GroupLtd's Recent Performance Look Like?

For instance, Guangdong Yuehai Feeds GroupLtd's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling 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 Guangdong Yuehai Feeds GroupLtd will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Guangdong Yuehai Feeds GroupLtd?

The only time you'd be truly comfortable seeing a P/S as low as Guangdong Yuehai Feeds GroupLtd'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 5.6% 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.

In contrast to the company, the rest of the industry is expected to grow by 16% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this information, we are not surprised that Guangdong Yuehai Feeds GroupLtd is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What We Can Learn From Guangdong Yuehai Feeds GroupLtd's P/S?

The latest share price surge wasn't enough to lift Guangdong Yuehai Feeds GroupLtd's P/S close to the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

It's no surprise that Guangdong Yuehai Feeds GroupLtd 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.

Before you settle on your opinion, we've discovered 2 warning signs for Guangdong Yuehai Feeds GroupLtd (1 doesn't sit too well with us!) that you should be aware of.

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.