Hubei Geoway Investment Co.,Ltd. (SHSE:600462) Stock Rockets 29% But Many Are Still Ignoring The Company

The Hubei Geoway Investment Co.,Ltd. (SHSE:600462) share price has done very well over the last month, posting an excellent gain of 29%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 20% over that time.

Even after such a large jump in price, it's still not a stretch to say that Hubei Geoway InvestmentLtd's price-to-sales (or "P/S") ratio of 2.4x right now seems quite "middle-of-the-road" compared to the Forestry industry in China, where the median P/S ratio is around 1.9x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

See our latest analysis for Hubei Geoway InvestmentLtd

What Does Hubei Geoway InvestmentLtd's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Hubei Geoway InvestmentLtd has been doing very well. It might be that many expect the strong revenue performance to wane, which has kept the share price, and thus the P/S ratio, from rising. Those who are bullish on Hubei Geoway InvestmentLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Hubei Geoway InvestmentLtd will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Hubei Geoway InvestmentLtd?

The only time you'd be comfortable seeing a P/S like Hubei Geoway InvestmentLtd's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 51%. The latest three year period has also seen an excellent 113% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is only predicted to deliver 16% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

In light of this, it's curious that Hubei Geoway InvestmentLtd's P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

What Does Hubei Geoway InvestmentLtd's P/S Mean For Investors?

Its shares have lifted substantially and now Hubei Geoway InvestmentLtd's P/S is back within range of the industry median. 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.

We've established that Hubei Geoway InvestmentLtd currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Hubei Geoway InvestmentLtd that 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.

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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.