Investors Give Zhejiang Huatong Meat Products Co., Ltd. (SZSE:002840) Shares A 28% Hiding

Zhejiang Huatong Meat Products Co., Ltd. (SZSE:002840) shares have had a horrible month, losing 28% after a relatively good period beforehand. The last month has meant the stock is now only up 6.7% during the last year.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Zhejiang Huatong Meat Products' P/S ratio of 1.2x, since the median price-to-sales (or "P/S") ratio for the Food industry in China is also close to 1.4x. 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 Zhejiang Huatong Meat Products

What Does Zhejiang Huatong Meat Products' Recent Performance Look Like?

Zhejiang Huatong Meat Products could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Keen to find out how analysts think Zhejiang Huatong Meat Products' future stacks up against the industry? In that case, our free report is a great place to start.

What Are Revenue Growth Metrics Telling Us About The P/S?

Zhejiang Huatong Meat Products' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. As a result, revenue from three years ago have also fallen 8.1% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 87% as estimated by the five analysts watching the company. With the industry only predicted to deliver 18%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Zhejiang Huatong Meat Products' P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Zhejiang Huatong Meat Products' plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Looking at Zhejiang Huatong Meat Products' 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. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You should always think about risks. Case in point, we've spotted 1 warning sign for Zhejiang Huatong Meat Products you should be aware of.

If you're unsure about the strength of Zhejiang Huatong Meat Products' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.

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