Shanghai Aiko Solar Energy Co.,Ltd. (SHSE:600732) Might Not Be As Mispriced As It Looks After Plunging 29%

Unfortunately for some shareholders, the Shanghai Aiko Solar Energy Co.,Ltd. (SHSE:600732) share price has dived 29% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 69% share price decline.

Following the heavy fall in price, Shanghai Aiko Solar EnergyLtd may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 6.2x and even P/S higher than 11x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

Check out our latest analysis for Shanghai Aiko Solar EnergyLtd

How Shanghai Aiko Solar EnergyLtd Has Been Performing

Shanghai Aiko Solar EnergyLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If you still like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think Shanghai Aiko Solar EnergyLtd'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 Shanghai Aiko Solar EnergyLtd?

The only time you'd be truly comfortable seeing a P/S as depressed as Shanghai Aiko Solar EnergyLtd's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 37% decrease to the company's top line. However, a few very strong years before that means that it was still able to grow revenue by an impressive 102% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 51% over the next year. That's shaping up to be materially higher than the 35% growth forecast for the broader industry.

In light of this, it's peculiar that Shanghai Aiko Solar EnergyLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Shanghai Aiko Solar EnergyLtd's P/S Mean For Investors?

Shanghai Aiko Solar EnergyLtd's P/S looks about as weak as its stock price lately. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

A look at Shanghai Aiko Solar EnergyLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It is also worth noting that we have found 1 warning sign for Shanghai Aiko Solar EnergyLtd that you need to take into consideration.

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.

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