Fuxin Dare Automotive Parts Co., Ltd. (SZSE:300473) shares have had a really impressive month, gaining 26% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 3.2% isn't as attractive.

Even after such a large jump in price, given about half the companies operating in China's Auto Components industry have price-to-sales ratios (or "P/S") above 1.8x, you may still consider Fuxin Dare Automotive Parts as an attractive investment with its 0.6x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Fuxin Dare Automotive Parts' Recent Performance Look Like?

The recent revenue growth at Fuxin Dare Automotive Parts would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance might fall short of industry figures in the near future, leading to a reduced P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

How Is Fuxin Dare Automotive Parts' Revenue Growth Trending?

In order to justify its P/S ratio, Fuxin Dare Automotive Parts would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 3.0%. Revenue has also lifted 22% in aggregate from three years ago, partly thanks to the last 12 months of growth. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 24% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Fuxin Dare Automotive Parts' P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Fuxin Dare Automotive Parts' P/S Mean For Investors?

Despite Fuxin Dare Automotive Parts' share price climbing recently, its P/S still lags most other companies. 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 Fuxin Dare Automotive Parts confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Fuxin Dare Automotive Parts with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Fuxin Dare Automotive Parts, explore our interactive list of high quality stocks to get an idea of what else is out there.

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