Zhejiang Akcome New Energy Technology Co.,Ltd.'s (SZSE:002610) Business And Shares Still Trailing The Industry

Zhejiang Akcome New Energy Technology Co.,Ltd.'s (SZSE:002610) price-to-sales (or "P/S") ratio of 1.2x might make it look like a strong buy right now compared to the Semiconductor industry in China, where around half of the companies have P/S ratios above 5.7x and even P/S above 9x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

Check out our latest analysis for Zhejiang Akcome New Energy TechnologyLtd

How Zhejiang Akcome New Energy TechnologyLtd Has Been Performing

The revenue growth achieved at Zhejiang Akcome New Energy TechnologyLtd over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Although there are no analyst estimates available for Zhejiang Akcome New Energy TechnologyLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Zhejiang Akcome New Energy TechnologyLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Zhejiang Akcome New Energy TechnologyLtd's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The latest three year period has also seen an excellent 62% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 34% shows it's noticeably less attractive.

With this information, we can see why Zhejiang Akcome New Energy TechnologyLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Final Word

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.

In line with expectations, Zhejiang Akcome New Energy TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Zhejiang Akcome New Energy TechnologyLtd that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.