There's No Escaping DaTang HuaYin Electric Power CO.,LTD's (SHSE:600744) Muted Revenues Despite A 30% Share Price Rise

Despite an already strong run, DaTang HuaYin Electric Power CO.,LTD (SHSE:600744) shares have been powering on, with a gain of 30% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.0% over the last year.

In spite of the firm bounce in price, DaTang HuaYin Electric PowerLTD may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.8x, considering almost half of all companies in the Renewable Energy industry in China have P/S ratios greater than 2.1x and even P/S higher than 5x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for DaTang HuaYin Electric PowerLTD

What Does DaTang HuaYin Electric PowerLTD's Recent Performance Look Like?

For example, consider that DaTang HuaYin Electric PowerLTD's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. Those who are bullish on DaTang HuaYin Electric PowerLTD will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on DaTang HuaYin Electric PowerLTD will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, DaTang HuaYin Electric PowerLTD would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 4.6% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 9.0% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Comparing that to the industry, which is predicted to deliver 12% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why DaTang HuaYin Electric PowerLTD is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On DaTang HuaYin Electric PowerLTD's P/S

Despite DaTang HuaYin Electric PowerLTD'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.

As we suspected, our examination of DaTang HuaYin Electric PowerLTD revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for DaTang HuaYin Electric PowerLTD you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.