The Market Lifts Beijing Zhong Ke San Huan High-Tech Co., Ltd. (SZSE:000970) Shares 28% But It Can Do More

Despite an already strong run, Beijing Zhong Ke San Huan High-Tech Co., Ltd. (SZSE:000970) shares have been powering on, with a gain of 28% in the last thirty days. Unfortunately, despite the strong performance over the last month, the full year gain of 9.2% isn't as attractive.

Although its price has surged higher, Beijing Zhong Ke San Huan High-Tech may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.1x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 4.5x and even P/S higher than 9x are not unusual. 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 Beijing Zhong Ke San Huan High-Tech

How Has Beijing Zhong Ke San Huan High-Tech Performed Recently?

Beijing Zhong Ke San Huan High-Tech 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 this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Beijing Zhong Ke San Huan High-Tech's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Beijing Zhong Ke San Huan High-Tech's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Beijing Zhong Ke San Huan High-Tech's is when the company's growth is on track to lag the industry decidedly.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 20%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 5.3% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Looking ahead now, revenue is anticipated to climb by 42% during the coming year according to the only analyst following the company. That's shaping up to be materially higher than the 27% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Beijing Zhong Ke San Huan High-Tech's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What Does Beijing Zhong Ke San Huan High-Tech's P/S Mean For Investors?

Shares in Beijing Zhong Ke San Huan High-Tech have risen appreciably however, its P/S is still subdued. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

A look at Beijing Zhong Ke San Huan High-Tech's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Plus, you should also learn about these 2 warning signs we've spotted with Beijing Zhong Ke San Huan High-Tech.

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.