United Renewable Energy Co., Ltd. (TWSE:3576) held back by insufficient growth even as shares surge 26%

United Renewable Energy Co., Ltd. (TWSE:3576) shares continued their recent momentum, gaining 26% in the last month alone. Unfortunately, last month’s gains did not help to redress last year’s losses, with shares still down 21% in that time.

Even after such a large price jump, United Renewable Energy could still be sending buy signals with a price-to-sales (or “P/S”) ratio of 2.7x, considering that almost half of all companies in Taiwan’s semiconductor industry have P/S ratios greater than 4x, and even P/S ratios higher than 8x are not uncommon. However, the P/S may be low for a reason and requires further investigation to determine whether it is justified.

Check out our latest analysis for United Renewable Energy

How has United Renewable Energy been performing recently?

For example, consider that United Renewable Energy’s financial results have been weak recently as its revenues have been declining. Many may be expecting the disappointing revenue performance to continue or accelerate, which has lowered the P/S. If you like the company, you’ll be hoping that this isn’t the case, so you can potentially buy the stock when it’s out of favor.

Want a complete picture of your company’s profits, revenues and cash flow? Then our free The report on United Renewable Energy will help you analyze the historical performance of this company.

What is the revenue growth trend for United Renewable Energy?

United Renewable Energy’s P/S ratio is typical for a company that is expected to deliver only limited growth and, more importantly, underperform the industry.

Looking back, the company’s revenue growth last year wasn’t something to be happy about, as it posted a disappointing 50% decline. This means that in the long run, there has also been a decline in revenue, as revenue has fallen by a total of 26% over the past three years. Therefore, it’s fair to say that the revenue growth in recent times has been unwelcome for the company.

Comparing this medium-term revenue trajectory to the overall industry forecast of 26% growth in one year shows that things aren’t looking great.

With that in mind, we understand why United Renewable Energy’s P/S is lower than most of its industry peers. However, we believe that declining revenues are unlikely to lead to a sustainable P/S in the long term, which could set shareholders up for future disappointment. Even maintaining these prices may be difficult to achieve, as recent revenue trends are already weighing on the stock.

Last word

United Renewable Energy’s share price has surged recently, but its P/S remains modest. We typically caution against reading too much into price-to-sales ratios when making investment decisions, although it can tell you a lot about what other market participants think about the company.

As we suspected, our research on United Renewable Energy showed that its declining revenues over the medium term are contributing to its low P/S ratio, given that the industry is expected to grow. At this stage, investors believe that the potential for revenue improvement is not large enough to justify a higher P/S ratio. If recent revenue trends over the medium term continue, it is difficult to see the stock moving strongly in either direction in the near future under these circumstances.

The company’s balance sheet is another key area of ​​risk analysis. Take a look at our free United Renewable Energy balance sheet analysis with six simple checks on some of these key factors.

if you are uncertain about the strength of United Renewable Energy’s businesswhy not check out our interactive list of stocks with solid business fundamentals for other companies you might have missed.

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This Simply Wall St article is for general information purposes only. Our commentary is based solely on historical data and analyst forecasts, and is based on an objective methodology. Our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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