Getting In Cheap On China Eastern Airlines Corporation Limited (SHSE:600115) Might Be Difficult

With a median price-to-sales (or "P/S") ratio of close to 0.7x in the Airlines industry in China, you could be forgiven for feeling indifferent about China Eastern Airlines Corporation Limited's (SHSE:600115) P/S ratio, which comes in at about the same. 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.

Check out our latest analysis for China Eastern Airlines

What Does China Eastern Airlines' Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, China Eastern Airlines has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on China Eastern Airlines will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

China Eastern Airlines' P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 36%. The strong recent performance means it was also able to grow revenue by 90% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 11% as estimated by the eight analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 9.3%, which is not materially different.

With this information, we can see why China Eastern Airlines is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does China Eastern Airlines' P/S Mean For Investors?

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.

A China Eastern Airlines' P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Airlines industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless these conditions change, they will continue to support the share price at these levels.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for China Eastern Airlines with six simple checks on some of these key factors.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.