Shandong Delisi Food Co., Ltd. (SZSE:002330) Screens Well But There Might Be A Catch

You may think that with a price-to-sales (or "P/S") ratio of 0.8x Shandong Delisi Food Co., Ltd. (SZSE:002330) is a stock worth checking out, seeing as almost half of all the Food companies in China have P/S ratios greater than 1.7x and even P/S higher than 4x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Shandong Delisi Food

How Has Shandong Delisi Food Performed Recently?

Recent times have been advantageous for Shandong Delisi Food as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shandong Delisi Food.

Is There Any Revenue Growth Forecasted For Shandong Delisi Food?

The only time you'd be truly comfortable seeing a P/S as low as Shandong Delisi Food'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 47% last year. The latest three year period has also seen a 5.1% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 17% during the coming year according to the lone analyst following the company. That's shaping up to be similar to the 16% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Shandong Delisi Food'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 Final Word

Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

It looks to us like the P/S figures for Shandong Delisi Food 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You always need to take note of risks, for example - Shandong Delisi Food has 2 warning signs we think 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.