Positive Sentiment Still Eludes CBAK Energy Technology, Inc. (NASDAQ:CBAT) Following 26% Share Price Slump

CBAK Energy Technology, Inc. (NASDAQ:CBAT) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 7.3% in the last year.

Since its price has dipped substantially, CBAK Energy Technology may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.4x, considering almost half of all companies in the Electrical industry in the United States have P/S ratios greater than 1.5x and even P/S higher than 4x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for CBAK Energy Technology

What Does CBAK Energy Technology's Recent Performance Look Like?

Recent times haven't been great for CBAK Energy Technology as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on CBAK Energy Technology.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

There's an inherent assumption that a company should underperform the industry for P/S ratios like CBAK Energy Technology's to be considered reasonable.

Retrospectively, the last year delivered a decent 15% gain to the company's revenues. The latest three year period has seen an incredible overall rise in revenue, even though the last 12 month performance was only fair. So we can start by confirming that the company has done a tremendous job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 28% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 14%, which is noticeably less attractive.

With this in consideration, we find it intriguing that CBAK Energy Technology's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

The southerly movements of CBAK Energy Technology's shares means its P/S is now sitting at a pretty low level. 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.

To us, it seems CBAK Energy Technology currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Don't forget that there may be other risks. For instance, we've identified 3 warning signs for CBAK Energy Technology that 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.