Beijing UniStrong Science&Technology Co.,Ltd.'s (SZSE:002383) Share Price Boosted 28% But Its Business Prospects Need A Lift Too

Beijing UniStrong Science&Technology Co.,Ltd. (SZSE:002383) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 23% in the last twelve months.

Although its price has surged higher, Beijing UniStrong Science&TechnologyLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 3x, considering almost half of all companies in the Communications industry in China have P/S ratios greater than 4.3x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Beijing UniStrong Science&TechnologyLtd

How Has Beijing UniStrong Science&TechnologyLtd Performed Recently?

For instance, Beijing UniStrong Science&TechnologyLtd's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. 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 out of favour.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

In order to justify its P/S ratio, Beijing UniStrong Science&TechnologyLtd would need to produce sluggish growth that's trailing the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 28%. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 52% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that Beijing UniStrong Science&TechnologyLtd's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On Beijing UniStrong Science&TechnologyLtd's P/S

Beijing UniStrong Science&TechnologyLtd's stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

In line with expectations, Beijing UniStrong Science&TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Having said that, be aware Beijing UniStrong Science&TechnologyLtd is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Beijing UniStrong Science&TechnologyLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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

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.