Aerospace CH UAV Co.,Ltd (SZSE:002389) Looks Just Right With A 45% Price Jump

Aerospace CH UAV Co.,Ltd (SZSE:002389) shareholders have had their patience rewarded with a 45% share price jump in the last month. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 9.9% over the last year.

Following the firm bounce in price, Aerospace CH UAVLtd may be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 6.8x, since almost half of all companies in the Electronic industry in China have P/S ratios under 4x and even P/S lower than 2x 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 lofty.

View our latest analysis for Aerospace CH UAVLtd

How Aerospace CH UAVLtd Has Been Performing

Aerospace CH UAVLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It might be that many expect the dour revenue performance to recover substantially, which has kept the P/S from collapsing. If not, then existing shareholders may be extremely nervous about the viability of the share price.

Want the full picture on analyst estimates for the company? Then our free report on Aerospace CH UAVLtd will help you uncover what's on the horizon.

How Is Aerospace CH UAVLtd's Revenue Growth Trending?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like Aerospace CH UAVLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. As a result, revenue from three years ago have also fallen 9.0% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 38% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

With this information, we can see why Aerospace CH UAVLtd is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Key Takeaway

The strong share price surge has lead to Aerospace CH UAVLtd's P/S soaring as well. 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.

We've established that Aerospace CH UAVLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Aerospace CH UAVLtd you should know about.

If you're unsure about the strength of Aerospace CH UAVLtd'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.