Investors Still Aren't Entirely Convinced By Baylin Technologies Inc.'s (TSE:BYL) Revenues Despite 26% Price Jump

Baylin Technologies Inc. (TSE:BYL) shares have continued their recent momentum with a 26% gain in the last month alone. The annual gain comes to 130% following the latest surge, making investors sit up and take notice.

Even after such a large jump in price, Baylin Technologies may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.1x, considering almost half of all companies in the Electronic industry in Canada have P/S ratios greater than 2.9x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Baylin Technologies

What Does Baylin Technologies' P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Baylin Technologies has been doing relatively well. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Baylin Technologies.

How Is Baylin Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Baylin Technologies would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 31%. Still, revenue has fallen 30% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 13% over the next year. Meanwhile, the rest of the industry is forecast to expand by 13%, which is not materially different.

With this information, we find it odd that Baylin Technologies is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What Does Baylin Technologies' P/S Mean For Investors?

The latest share price surge wasn't enough to lift Baylin Technologies' P/S close to the industry median. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Baylin Technologies currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. The low P/S could be an indication that the revenue growth estimates are being questioned by the market. It appears some are indeed anticipating revenue instability, because these conditions should normally provide more support to the share price.

It is also worth noting that we have found 5 warning signs for Baylin Technologies (3 are concerning!) that you need to take into consideration.

If you're unsure about the strength of Baylin Technologies' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.