The Shenyang Huitian Thermal Power Co.,Ltd (SZSE:000692) share price has done very well over the last month, posting an excellent gain of 27%. The last 30 days bring the annual gain to a very sharp 50%.

In spite of the firm bounce in price, Shenyang Huitian Thermal PowerLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1x, since almost half of all companies in the Water Utilities industry in China have P/S ratios greater than 2.5x and even P/S higher than 5x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

How Has Shenyang Huitian Thermal PowerLtd Performed Recently?

Revenue has risen firmly for Shenyang Huitian Thermal PowerLtd recently, which is pleasing to see. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the 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 Shenyang Huitian Thermal PowerLtd's Revenue Growth Trending?

Shenyang Huitian Thermal PowerLtd'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.

Retrospectively, the last year delivered a decent 10% gain to the company's revenues. The latest three year period has also seen a 8.5% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

This is in contrast to the rest of the industry, which is expected to grow by 11% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this in consideration, it's easy to understand why Shenyang Huitian Thermal PowerLtd's P/S falls short of the mark set by its industry peers. 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 Shenyang Huitian Thermal PowerLtd's P/S

Shenyang Huitian Thermal PowerLtd's stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Shenyang Huitian Thermal PowerLtd 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. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Shenyang Huitian Thermal PowerLtd (including 2 which are concerning).

If these risks are making you reconsider your opinion on Shenyang Huitian Thermal PowerLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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