Revenues Not Telling The Story For China Shuifa Singyes Energy Holdings Limited (HKG:750) After Shares Rise 49%

China Shuifa Singyes Energy Holdings Limited (HKG:750) shares have had a really impressive month, gaining 49% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 7.3% isn't as attractive.

In spite of the firm bounce in price, there still wouldn't be many who think China Shuifa Singyes Energy Holdings' price-to-sales (or "P/S") ratio of 0.3x is worth a mention when it essentially matches the median P/S in Hong Kong's Construction industry. 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.

View our latest analysis for China Shuifa Singyes Energy Holdings

How China Shuifa Singyes Energy Holdings Has Been Performing

As an illustration, revenue has deteriorated at China Shuifa Singyes Energy Holdings over the last year, which is not ideal at all. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. 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 China Shuifa Singyes Energy Holdings, 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 China Shuifa Singyes Energy Holdings?

In order to justify its P/S ratio, China Shuifa Singyes Energy Holdings would need to produce growth that's similar to the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 18%. This means it has also seen a slide in revenue over the longer-term as revenue is down 41% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 10% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's somewhat alarming that China Shuifa Singyes Energy Holdings' P/S sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What Does China Shuifa Singyes Energy Holdings' P/S Mean For Investors?

Its shares have lifted substantially and now China Shuifa Singyes Energy Holdings' P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

The fact that China Shuifa Singyes Energy Holdings currently trades at a P/S on par with the rest of the industry is surprising to us since its recent revenues have been in decline over the medium-term, all while the industry is set to grow. Even though it matches the industry, we're uncomfortable with the current P/S ratio, as this dismal revenue performance is unlikely to support a more positive sentiment for long. Unless the the circumstances surrounding the recent medium-term improve, it wouldn't be wrong to expect a a difficult period ahead for the company's shareholders.

Before you take the next step, you should know about the 1 warning sign for China Shuifa Singyes Energy Holdings that we have uncovered.

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.