Investors Continue Waiting On Sidelines For Shandong Minhe Animal Husbandry Co., Ltd. (SZSE:002234)

It's not a stretch to say that Shandong Minhe Animal Husbandry Co., Ltd.'s (SZSE:002234) price-to-sales (or "P/S") ratio of 1.6x right now seems quite "middle-of-the-road" for companies in the Food industry in China, where the median P/S ratio is around 1.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Shandong Minhe Animal Husbandry

What Does Shandong Minhe Animal Husbandry's P/S Mean For Shareholders?

Shandong Minhe Animal Husbandry hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Shandong Minhe Animal Husbandry will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Shandong Minhe Animal Husbandry?

The only time you'd be comfortable seeing a P/S like Shandong Minhe Animal Husbandry's is when the company's growth is tracking the industry closely.

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 6.4%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 9.5% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Turning to the outlook, the next year should generate growth of 45% as estimated by the dual analysts watching the company. With the industry only predicted to deliver 13%, the company is positioned for a stronger revenue result.

With this information, we find it interesting that Shandong Minhe Animal Husbandry is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Shandong Minhe Animal Husbandry's P/S Mean For Investors?

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.

Looking at Shandong Minhe Animal Husbandry's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Shandong Minhe Animal Husbandry with six simple checks.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.