The Market Lifts Beijing Changjiu Logistics Co.,Ltd (SHSE:603569) Shares 25% But It Can Do More

Despite an already strong run, Beijing Changjiu Logistics Co.,Ltd (SHSE:603569) shares have been powering on, with a gain of 25% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 29% over that time.

In spite of the firm bounce in price, Beijing Changjiu LogisticsLtd's price-to-sales (or "P/S") ratio of 1.4x might still make it look like a buy right now compared to the Transportation industry in China, where around half of the companies have P/S ratios above 3.4x and even P/S above 7x are quite common. 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 Changjiu LogisticsLtd

What Does Beijing Changjiu LogisticsLtd's P/S Mean For Shareholders?

Beijing Changjiu LogisticsLtd hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Beijing Changjiu LogisticsLtd.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Beijing Changjiu LogisticsLtd's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 3.8%. The last three years don't look nice either as the company has shrunk revenue by 15% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 73% as estimated by the sole analyst watching the company. That's shaping up to be materially higher than the 5.9% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Beijing Changjiu LogisticsLtd's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

What Does Beijing Changjiu LogisticsLtd's P/S Mean For Investors?

Despite Beijing Changjiu LogisticsLtd's share price climbing recently, its P/S still lags most other companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

To us, it seems Beijing Changjiu LogisticsLtd currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Beijing Changjiu LogisticsLtd (at least 2 which shouldn't be ignored), and understanding them should be part of your investment process.

If you're unsure about the strength of Beijing Changjiu LogisticsLtd'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.