Firan Technology Group Corporation (TSE:FTG) Shares Fly 26% But Investors Aren't Buying For Growth

The Firan Technology Group Corporation (TSE:FTG) share price has done very well over the last month, posting an excellent gain of 26%. The last 30 days bring the annual gain to a very sharp 76%.

Although its price has surged higher, Firan Technology Group's price-to-sales (or "P/S") ratio of 0.9x might still make it look like a strong buy right now compared to the wider Electronic industry in Canada, where around half of the companies have P/S ratios above 3.5x and even P/S above 11x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Firan Technology Group

How Has Firan Technology Group Performed Recently?

Recent times have been advantageous for Firan Technology Group as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think Firan Technology Group's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Firan Technology Group's Revenue Growth Trending?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Firan Technology Group's to be considered reasonable.

If we review the last year of revenue growth, the company posted a terrific increase of 51%. The latest three year period has also seen an excellent 32% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 8.0% over the next year. That's shaping up to be materially lower than the 11% growth forecast for the broader industry.

With this information, we can see why Firan Technology Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Firan Technology Group's P/S Mean For Investors?

Shares in Firan Technology Group have risen appreciably however, its P/S is still subdued. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As expected, our analysis of Firan Technology Group's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher 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 Firan Technology Group (1 can't be ignored!) 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.