Subdued Growth No Barrier To Guangxi Yuegui Guangye Holdings Co., Ltd. (SZSE:000833) With Shares Advancing 27%

Those holding Guangxi Yuegui Guangye Holdings Co., Ltd. (SZSE:000833) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 18% over that time.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Guangxi Yuegui Guangye Holdings' P/S ratio of 1.1x, since the median price-to-sales (or "P/S") ratio for the Forestry industry in China is also close to 1.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Guangxi Yuegui Guangye Holdings

What Does Guangxi Yuegui Guangye Holdings' Recent Performance Look Like?

Guangxi Yuegui Guangye Holdings has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to wane, which has kept the P/S from rising. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's not quite in favour.

Although there are no analyst estimates available for Guangxi Yuegui Guangye Holdings, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Guangxi Yuegui Guangye Holdings' Revenue Growth Trending?

In order to justify its P/S ratio, Guangxi Yuegui Guangye Holdings would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.5% last year. The solid recent performance means it was also able to grow revenue by 17% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 14% shows it's noticeably less attractive.

In light of this, it's curious that Guangxi Yuegui Guangye Holdings' P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Guangxi Yuegui Guangye Holdings' P/S Mean For Investors?

Guangxi Yuegui Guangye Holdings' stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that Guangxi Yuegui Guangye Holdings' average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

Before you take the next step, you should know about the 3 warning signs for Guangxi Yuegui Guangye Holdings that we have uncovered.

If you're unsure about the strength of Guangxi Yuegui Guangye Holdings' 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.