Investors Still Aren't Entirely Convinced By Qingdao Huijintong Power Equipment Co.,Ltd.'s (SHSE:603577) Revenues Despite 33% Price Jump

Those holding Qingdao Huijintong Power Equipment Co.,Ltd. (SHSE:603577) shares would be relieved that the share price has rebounded 33% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 28% in the last twelve months.

In spite of the firm bounce in price, it would still be understandable if you think Qingdao Huijintong Power EquipmentLtd is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.7x, considering almost half the companies in China's Metals and Mining industry have P/S ratios above 1.2x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Qingdao Huijintong Power EquipmentLtd

What Does Qingdao Huijintong Power EquipmentLtd's P/S Mean For Shareholders?

For example, consider that Qingdao Huijintong Power EquipmentLtd's financial performance has been poor lately as its revenue has been in decline. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Qingdao Huijintong Power EquipmentLtd 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 Qingdao Huijintong Power EquipmentLtd will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Qingdao Huijintong Power EquipmentLtd?

The only time you'd be truly comfortable seeing a P/S as low as Qingdao Huijintong Power EquipmentLtd's is when the company's growth is on track to lag the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 5.6%. Still, the latest three year period has seen an excellent 76% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is only predicted to deliver 15% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this information, we find it odd that Qingdao Huijintong Power EquipmentLtd is trading at a P/S lower than the industry. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

What Does Qingdao Huijintong Power EquipmentLtd's P/S Mean For Investors?

Despite Qingdao Huijintong Power EquipmentLtd's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Qingdao Huijintong Power EquipmentLtd revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

Before you take the next step, you should know about the 5 warning signs for Qingdao Huijintong Power EquipmentLtd (2 are significant!) that we have uncovered.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.