Greenland Technologies Holding Corporation (NASDAQ:GTEC) Soars 27% But It's A Story Of Risk Vs Reward

Those holding Greenland Technologies Holding Corporation (NASDAQ:GTEC) shares would be relieved that the share price has rebounded 27% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, despite the strong performance over the last month, the full year gain of 3.8% isn't as attractive.

Even after such a large jump in price, Greenland Technologies Holding's price-to-sales (or "P/S") ratio of 0.3x might still make it look like a buy right now compared to the Machinery industry in the United States, where around half of the companies have P/S ratios above 1.5x and even P/S above 4x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

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See our latest analysis for Greenland Technologies Holding

What Does Greenland Technologies Holding's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Greenland Technologies Holding has been very sluggish. Perhaps the market isn't expecting future revenue performance to improve, which has kept the P/S suppressed. If you still like the company, you'd want its revenue trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Greenland Technologies Holding's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Greenland Technologies Holding's Revenue Growth Trending?

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

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 7.1%. This means it has also seen a slide in revenue over the longer-term as revenue is down 15% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Looking ahead now, revenue is anticipated to remain somewhat buoyant, growing by 1.3% during the coming year according to the sole analyst following the company. This isn't typically strong growth, but with the rest of the industry predicted to shrink by 1.9%, that would be a solid result.

With this in consideration, we find it intriguing that Greenland Technologies Holding's P/S falls short of its industry peers. It looks like most investors aren't convinced at all that the company can achieve positive future growth in the face of a shrinking broader industry.

The Bottom Line On Greenland Technologies Holding's P/S

Greenland Technologies Holding's stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Greenland Technologies Holding's analyst forecasts revealed that its superior revenue outlook against a shaky industry isn't contributing to its P/S anywhere near as much as we would have predicted. There could be some major unobserved threats to revenue preventing the P/S ratio from matching the positive outlook. One major risk is whether its revenue trajectory can keep outperforming under these tough industry conditions. So, the risk of a price drop looks to be subdued, but investors seem to think future revenue could see a lot of volatility.

Before you settle on your opinion, we've discovered 4 warning signs for Greenland Technologies Holding (2 are significant!) that you should be aware of.

If you're unsure about the strength of Greenland Technologies Holding's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.