The Market Lifts Guangzhou Hangxin Aviation Technology Co., Ltd. (SZSE:300424) Shares 29% But It Can Do More

Despite an already strong run, Guangzhou Hangxin Aviation Technology Co., Ltd. (SZSE:300424) shares have been powering on, with a gain of 29% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 38% in the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Guangzhou Hangxin Aviation Technology's price-to-sales (or "P/S") ratio of 2.9x is worth a mention when the median P/S in China's Infrastructure industry is similar at about 3.2x. 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 Guangzhou Hangxin Aviation Technology

How Has Guangzhou Hangxin Aviation Technology Performed Recently?

As an illustration, revenue has deteriorated at Guangzhou Hangxin Aviation Technology over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Although there are no analyst estimates available for Guangzhou Hangxin Aviation Technology, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Guangzhou Hangxin Aviation Technology?

The only time you'd be comfortable seeing a P/S like Guangzhou Hangxin Aviation Technology's is when the company's growth is tracking the industry closely.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 13%. 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 29% 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.

When compared to the industry's one-year growth forecast of 6.7%, the most recent medium-term revenue trajectory is noticeably more alluring

With this information, we find it interesting that Guangzhou Hangxin Aviation Technology is trading at a fairly similar P/S compared to the industry. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Guangzhou Hangxin Aviation Technology's P/S

Its shares have lifted substantially and now Guangzhou Hangxin Aviation Technology's P/S is back within range of the industry median. 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.

We've established that Guangzhou Hangxin Aviation Technology currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to see the likelihood of revenue fluctuations in the future.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Guangzhou Hangxin Aviation Technology (of which 2 are concerning!) you should know about.

If you're unsure about the strength of Guangzhou Hangxin Aviation Technology'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.