China International Marine Containers (Group) Co., Ltd.'s (SZSE:000039) price-to-sales (or "P/S") ratio of 0.3x might make it look like a strong buy right now compared to the Machinery industry in China, where around half of the companies have P/S ratios above 3.1x and even P/S above 6x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for China International Marine Containers (Group)

What Does China International Marine Containers (Group)'s P/S Mean For Shareholders?

Recent times have been advantageous for China International Marine Containers (Group) as its revenues have been rising faster than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, China International Marine Containers (Group) would need to produce anemic growth that's substantially trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 69%. The strong recent performance means it was also able to grow revenue by 59% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 2.2% during the coming year according to the three analysts following the company. That's shaping up to be materially lower than the 31% growth forecast for the broader industry.

With this in consideration, its clear as to why China International Marine Containers (Group)'s P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does China International Marine Containers (Group)'s P/S Mean For Investors?

Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As expected, our analysis of China International Marine Containers (Group)'s analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - China International Marine Containers (Group) has 1 warning sign we think you should be aware of.

If you're unsure about the strength of China International Marine Containers (Group)'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.