Despite an already strong run, Dalian Haosen Intelligent Manufacturing Co., Ltd. (SHSE:688529) shares have been powering on, with a gain of 38% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 20% in the last twelve months.

Although its price has surged higher, Dalian Haosen Intelligent Manufacturing may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.5x, since almost half of all companies in the Machinery industry in China have P/S ratios greater than 3.2x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Dalian Haosen Intelligent Manufacturing's P/S Mean For Shareholders?

Recent revenue growth for Dalian Haosen Intelligent Manufacturing has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

Dalian Haosen Intelligent Manufacturing'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.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.0% last year. The latest three year period has also seen an excellent 101% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 16% during the coming year according to the sole analyst following the company. That's shaping up to be materially lower than the 25% growth forecast for the broader industry.

With this information, we can see why Dalian Haosen Intelligent Manufacturing is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Dalian Haosen Intelligent Manufacturing's P/S Mean For Investors?

The latest share price surge wasn't enough to lift Dalian Haosen Intelligent Manufacturing's P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As expected, our analysis of Dalian Haosen Intelligent Manufacturing's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

You always need to take note of risks, for example - Dalian Haosen Intelligent Manufacturing has 2 warning signs we think you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.