The company's financial health is questionable with EBIT level losses and declining revenue. A significant rise in debt and cash burn over the past year makes the stock a risky investment.
Investors may expect an improvement in the company's lackluster revenue performance, but the high P/S ratio may not be sustainable. The weak revenue outlook suggests a risk of share price decline, which could lower the P/S ratio. Unless conditions improve significantly, these prices may not be reasonable.
Investors hope for a business turnaround despite poor growth, but risk disappointment if P/S aligns with negative growth rates. Shareholders may face a tough period unless recent medium-term circumstances improve.
Zhejiang Dahua Technology's ROCE trend is disappointing, dropping from 22% to 6.6% in five years. Despite reinvestments, sales haven't significantly improved. The stock's 32% return in five years suggests awareness of these poor trends, making it a less promising multi-bagger stock candidate.
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