Guangdong Shenglu Telecommunication Tech. Co., Ltd.'s (SZSE:002446) Shares Leap 30% Yet They're Still Not Telling The Full Story

Those holding Guangdong Shenglu Telecommunication Tech. Co., Ltd. (SZSE:002446) shares would be relieved that the share price has rebounded 30% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 31% over that time.

Although its price has surged higher, there still wouldn't be many who think Guangdong Shenglu Telecommunication Tech's price-to-sales (or "P/S") ratio of 4.9x is worth a mention when the median P/S in China's Communications industry is similar at about 4.5x. 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.

See our latest analysis for Guangdong Shenglu Telecommunication Tech

What Does Guangdong Shenglu Telecommunication Tech's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Guangdong Shenglu Telecommunication Tech's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Want the full picture on analyst estimates for the company? Then our free report on Guangdong Shenglu Telecommunication Tech will help you uncover what's on the horizon.

How Is Guangdong Shenglu Telecommunication Tech's Revenue Growth Trending?

In order to justify its P/S ratio, Guangdong Shenglu Telecommunication Tech would need to produce growth that's similar to 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 4.6%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 14% in total. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 65% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 51%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Guangdong Shenglu Telecommunication Tech's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

What Does Guangdong Shenglu Telecommunication Tech's P/S Mean For Investors?

Its shares have lifted substantially and now Guangdong Shenglu Telecommunication Tech's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Guangdong Shenglu Telecommunication Tech currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. When we see a strong revenue outlook, with growth outpacing the industry, we can only assume potential uncertainty around these figures are what might be placing slight pressure on the P/S ratio. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Guangdong Shenglu Telecommunication Tech with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Guangdong Shenglu Telecommunication Tech'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.