Beijing Beida Jade Bird Universal Sci-Tech Company Limited (HKG:8095) Stock Rockets 28% As Investors Are Less Pessimistic Than Expected

Beijing Beida Jade Bird Universal Sci-Tech Company Limited (HKG:8095) shareholders would be excited to see that the share price has had a great month, posting a 28% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 35% in the last twelve months.

Although its price has surged higher, you could still be forgiven for feeling indifferent about Beijing Beida Jade Bird Universal Sci-Tech's P/S ratio of 0.9x, since the median price-to-sales (or "P/S") ratio for the Industrials industry in Hong Kong is also close to 0.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Beijing Beida Jade Bird Universal Sci-Tech

How Beijing Beida Jade Bird Universal Sci-Tech Has Been Performing

Recent times have been quite advantageous for Beijing Beida Jade Bird Universal Sci-Tech as its revenue has been rising very briskly. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Beijing Beida Jade Bird Universal Sci-Tech 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 Beijing Beida Jade Bird Universal Sci-Tech will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Beijing Beida Jade Bird Universal Sci-Tech's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 31%. As a result, it also grew revenue by 14% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

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 find it interesting that Beijing Beida Jade Bird Universal Sci-Tech is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What We Can Learn From Beijing Beida Jade Bird Universal Sci-Tech's P/S?

Its shares have lifted substantially and now Beijing Beida Jade Bird Universal Sci-Tech's P/S is back within range of the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Beijing Beida Jade Bird Universal Sci-Tech's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Plus, you should also learn about this 1 warning sign we've spotted with Beijing Beida Jade Bird Universal Sci-Tech.

If these risks are making you reconsider your opinion on Beijing Beida Jade Bird Universal Sci-Tech, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.