Unfortunately for some shareholders, the Suzhou Harmontronics Automation Technology Co., Ltd (SHSE:688022) share price has dived 28% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 71% share price decline.

After such a large drop in price, considering around half the companies operating in China's Machinery industry have price-to-sales ratios (or "P/S") above 2.3x, you may consider Suzhou Harmontronics Automation Technology as an solid investment opportunity 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 Suzhou Harmontronics Automation Technology's P/S Mean For Shareholders?

Suzhou Harmontronics Automation Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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 Suzhou Harmontronics Automation Technology's Revenue Growth Trending?

Suzhou Harmontronics Automation Technology's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 16%. The latest three year period has also seen an excellent 110% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 61% over the next year. With the industry only predicted to deliver 22%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Suzhou Harmontronics Automation Technology is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Bottom Line On Suzhou Harmontronics Automation Technology's P/S

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

To us, it seems Suzhou Harmontronics Automation Technology currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. There could be some major risk factors that are placing downward pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Suzhou Harmontronics Automation Technology (of which 1 is significant!) you should know about.

If you're unsure about the strength of Suzhou Harmontronics Automation Technology'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.