Jiangsu Hagong Intelligent Robot Co., Ltd (SZSE:000584) shares have continued their recent momentum with a 28% gain in the last month alone. But the last month did very little to improve the 56% share price decline over the last year.

Although its price has surged higher, when close to half the companies operating in China's Machinery industry have price-to-sales ratios (or "P/S") above 2.2x, you may still consider Jiangsu Hagong Intelligent Robot as an enticing stock to check out with its 0.7x 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 Jiangsu Hagong Intelligent Robot's P/S Mean For Shareholders?

For instance, Jiangsu Hagong Intelligent Robot's receding revenue in recent times would have to be some food for thought. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Jiangsu Hagong Intelligent Robot?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Jiangsu Hagong Intelligent Robot's to be considered reasonable.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 1.2%. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 21% in total. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

This is in contrast to the rest of the industry, which is expected to grow by 23% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Jiangsu Hagong Intelligent Robot is trading at a P/S lower than the industry. 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.

The Bottom Line On Jiangsu Hagong Intelligent Robot's P/S

Jiangsu Hagong Intelligent Robot's stock price has surged recently, but its but its P/S still remains modest. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

In line with expectations, Jiangsu Hagong Intelligent Robot maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Jiangsu Hagong Intelligent Robot that 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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