Those holding Guangdong Greenway Technology Co.,Ltd (SHSE:688345) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 48% over that time.

Although its price has surged higher, when close to half the companies operating in China's Electrical industry have price-to-sales ratios (or "P/S") above 2.3x, you may still consider Guangdong Greenway TechnologyLtd as an enticing stock to check out with its 1.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does Guangdong Greenway TechnologyLtd's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Guangdong Greenway TechnologyLtd's revenue has gone into reverse gear, which is not great. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Guangdong Greenway TechnologyLtd?

In order to justify its P/S ratio, Guangdong Greenway TechnologyLtd would need to produce sluggish growth that's trailing the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 2.9%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 56% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 81% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 23%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Guangdong Greenway TechnologyLtd's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Despite Guangdong Greenway TechnologyLtd's share price climbing recently, its P/S still lags most other companies. 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.

Guangdong Greenway TechnologyLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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.

You should always think about risks. Case in point, we've spotted 1 warning sign for Guangdong Greenway TechnologyLtd you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.