The Market Lifts Asia Cuanon Technology (Shanghai) Co.,Ltd. (SHSE:603378) Shares 28% But It Can Do More

Asia Cuanon Technology (Shanghai) Co.,Ltd. (SHSE:603378) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

In spite of the firm bounce in price, Asia Cuanon Technology (Shanghai)Ltd's price-to-sales (or "P/S") ratio of 1x might still make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 2.1x and even P/S above 5x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Asia Cuanon Technology (Shanghai)Ltd

How Has Asia Cuanon Technology (Shanghai)Ltd Performed Recently?

While the industry has experienced revenue growth lately, Asia Cuanon Technology (Shanghai)Ltd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Asia Cuanon Technology (Shanghai)Ltd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Asia Cuanon Technology (Shanghai)Ltd?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Asia Cuanon Technology (Shanghai)Ltd's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 6.0%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 23% as estimated by the six analysts watching the company. With the industry predicted to deliver 25% growth , the company is positioned for a comparable revenue result.

In light of this, it's peculiar that Asia Cuanon Technology (Shanghai)Ltd's P/S sits below the majority of other companies. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Asia Cuanon Technology (Shanghai)Ltd's P/S

The latest share price surge wasn't enough to lift Asia Cuanon Technology (Shanghai)Ltd's P/S close to 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.

Our examination of Asia Cuanon Technology (Shanghai)Ltd's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Asia Cuanon Technology (Shanghai)Ltd that you need to be mindful of.

If these risks are making you reconsider your opinion on Asia Cuanon Technology (Shanghai)Ltd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.