Revenues Tell The Story For Guangdong Fenghua Advanced Technology (Holding) Co., Ltd. (SZSE:000636)

There wouldn't be many who think Guangdong Fenghua Advanced Technology (Holding) Co., Ltd.'s (SZSE:000636) price-to-sales (or "P/S") ratio of 3.3x is worth a mention when the median P/S for the Electronic industry in China is similar at about 3.6x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for Guangdong Fenghua Advanced Technology (Holding)

What Does Guangdong Fenghua Advanced Technology (Holding)'s Recent Performance Look Like?

Recent revenue growth for Guangdong Fenghua Advanced Technology (Holding) has been in line with the industry. Perhaps the market is expecting future revenue performance to show no drastic signs of changing, justifying the P/S being at current levels. Those who are bullish on Guangdong Fenghua Advanced Technology (Holding) will be hoping that revenue performance can pick up, so that they can pick up the stock at a slightly lower valuation.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Guangdong Fenghua Advanced Technology (Holding).

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Guangdong Fenghua Advanced Technology (Holding) 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 4.4% last year. The latest three year period has also seen a 9.7% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 26% as estimated by the three analysts watching the company. With the industry predicted to deliver 26% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Guangdong Fenghua Advanced Technology (Holding)'s P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

What We Can Learn From Guangdong Fenghua Advanced Technology (Holding)'s P/S?

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.

A Guangdong Fenghua Advanced Technology (Holding)'s P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Electronic industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

It is also worth noting that we have found 3 warning signs for Guangdong Fenghua Advanced Technology (Holding) that you need to take into consideration.

If you're unsure about the strength of Guangdong Fenghua Advanced Technology (Holding)'s 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.