Henan Huaying Agricultural Development Co., Ltd.'s (SZSE:002321) Shares Leap 26% Yet They're Still Not Telling The Full Story

Henan Huaying Agricultural Development Co., Ltd. (SZSE:002321) shares have continued their recent momentum with a 26% gain in the last month alone. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 4.4% in the last twelve months.

In spite of the firm bounce in price, Henan Huaying Agricultural Development may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1x, considering almost half of all companies in the Food industry in China have P/S ratios greater than 1.7x and even P/S higher than 4x 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 Henan Huaying Agricultural Development

What Does Henan Huaying Agricultural Development's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Henan Huaying Agricultural Development has been doing very well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite 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 Henan Huaying Agricultural Development will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Henan Huaying Agricultural Development?

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

Taking a look back first, we see that the company grew revenue by an impressive 45% last year. The latest three year period has also seen an excellent 51% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 16% shows it's about the same on an annualised basis.

With this in consideration, we find it intriguing that Henan Huaying Agricultural Development's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

What Does Henan Huaying Agricultural Development's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Henan Huaying Agricultural Development'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.

The fact that Henan Huaying Agricultural Development currently trades at a low P/S relative to the industry is unexpected considering its recent three-year growth is in line with the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. revenue trends suggest that the risk of a price decline is low, investors appear to perceive a possibility of revenue volatility in the future.

A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for Henan Huaying Agricultural Development with six simple checks on some of these key factors.

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.