Hangzhou Huaxing Chuangye Communication Technology Co., Ltd. (SZSE:300025) has seen a significant increase in its share price over the past month, with a 40% gain. While the full-year gain of 23% is also reasonable, the company’s price-to-sales ratio of 9.5x is relatively high compared to others in the Telecom industry in China. This may signal a warning for investors, as the company’s revenue has been declining in recent times.
Investors may be optimistic about the company’s future performance, leading to the high P/S ratio. However, if the revenue continues to decline, it could pose a risk to shareholders. The company’s revenue growth has been disappointing, with a decline of 4.2% last year and 8.0% over the past three years.
In comparison, the industry is expected to deliver 5.0% growth in the next 12 months, highlighting the company’s downward momentum. This discrepancy between the company’s performance and industry expectations raises concerns about the sustainability of the current share price.
Although the recent boost in share price has driven up the P/S ratio, investors should consider the company’s declining revenue and industry outlook before making investment decisions. While the company may have potential for growth, the current valuation may not be justified given the recent performance. Investors should conduct further analysis and consider the risks before investing in Hangzhou Huaxing Chuangye Communication Technology.
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