There's No Escaping Baylin Technologies Inc.'s (TSE:BYL) Muted Revenues Despite A 26% Share Price Rise

Despite an already strong run, Baylin Technologies Inc. (TSE:BYL) shares have been powering on, with a gain of 26% in the last thirty days. Looking further back, the 24% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, Baylin Technologies' price-to-sales (or "P/S") ratio of 0.6x might still make it look like a buy right now compared to the Electronic industry in Canada, where around half of the companies have P/S ratios above 2.2x and even P/S above 10x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Baylin Technologies

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

With revenue growth that's inferior to most other companies of late, Baylin Technologies has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 Baylin Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

How Is Baylin Technologies' Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Baylin Technologies' is when the company's growth is on track to lag the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 10% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 30% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Turning to the outlook, the next year should bring diminished returns, with revenue decreasing 1.1% as estimated by the dual analysts watching the company. With the industry predicted to deliver 21% growth, that's a disappointing outcome.

In light of this, it's understandable that Baylin Technologies' P/S would sit below the majority of other companies. However, shrinking revenues are unlikely to lead to a stable P/S over the longer term. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Baylin Technologies' P/S?

The latest share price surge wasn't enough to lift Baylin Technologies' P/S close to the industry median. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

With revenue forecasts that are inferior to the rest of the industry, it's no surprise that Baylin Technologies' P/S is on the lower end of the spectrum. As other companies in the industry are forecasting revenue growth, Baylin Technologies' poor outlook justifies its low P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Baylin Technologies (1 is concerning!) that you need to be mindful of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.