Beijing Urban Construction Investment & Development Co., Ltd.'s (SHSE:600266) Shares Leap 38% Yet They're Still Not Telling The Full Story

Simply Wall St · 10/14 22:04

Beijing Urban Construction Investment & Development Co., Ltd. (SHSE:600266) shareholders have had their patience rewarded with a 38% share price jump in the last month. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 6.9% over the last year.

Even after such a large jump in price, Beijing Urban Construction Investment & Development may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.7x, since almost half of all companies in the Real Estate industry in China have P/S ratios greater than 1.8x and even P/S higher than 4x 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.

View our latest analysis for Beijing Urban Construction Investment & Development

ps-multiple-vs-industry
SHSE:600266 Price to Sales Ratio vs Industry October 14th 2024

How Beijing Urban Construction Investment & Development Has Been Performing

Beijing Urban Construction Investment & Development could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Keen to find out how analysts think Beijing Urban Construction Investment & Development's future stacks up against the industry? In that case, our free report is a great place to start.

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

Beijing Urban Construction Investment & Development'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 frustrating 34% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 19% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 55% over the next year. That's shaping up to be materially higher than the 10% growth forecast for the broader industry.

In light of this, it's peculiar that Beijing Urban Construction Investment & Development's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Beijing Urban Construction Investment & Development's P/S?

Beijing Urban Construction Investment & Development's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Beijing Urban Construction Investment & Development's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Before you settle on your opinion, we've discovered 2 warning signs for Beijing Urban Construction Investment & Development (1 is a bit unpleasant!) that you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.