BeijingWest Industries International Limited's (HKG:2339) Shares Bounce 32% But Its Business Still Trails The Industry

Despite an already strong run, BeijingWest Industries International Limited (HKG:2339) shares have been powering on, with a gain of 32% in the last thirty days. The last 30 days were the cherry on top of the stock's 545% gain in the last year, which is nothing short of spectacular.

Although its price has surged higher, given about half the companies operating in Hong Kong's Auto Components industry have price-to-sales ratios (or "P/S") above 1x, you may still consider BeijingWest Industries International as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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See our latest analysis for BeijingWest Industries International

How BeijingWest Industries International Has Been Performing

BeijingWest Industries International has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

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

How Is BeijingWest Industries International's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as BeijingWest Industries International's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 8.4% last year. The solid recent performance means it was also able to grow revenue by 15% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 24% shows it's noticeably less attractive.

In light of this, it's understandable that BeijingWest Industries International's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Bottom Line On BeijingWest Industries International's P/S

BeijingWest Industries International's stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of BeijingWest Industries International 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. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 2 warning signs for BeijingWest Industries International (1 is potentially serious!) that you need to be mindful of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.