Investors Still Aren't Entirely Convinced By Shinry Technologies Co., Ltd.'s (SZSE:300745) Revenues Despite 26% Price Jump

Shinry Technologies Co., Ltd. (SZSE:300745) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Still, the 30-day jump doesn't change the fact that longer term shareholders have seen their stock decimated by the 53% share price drop in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Shinry Technologies' price-to-sales (or "P/S") ratio of 2.1x is worth a mention when the median P/S in China's Auto Components industry is similar at about 2.3x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Shinry Technologies

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

With revenue growth that's inferior to most other companies of late, Shinry Technologies has been relatively sluggish. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Do Revenue Forecasts Match The P/S Ratio?

The only time you'd be comfortable seeing a P/S like Shinry Technologies' is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a worthy increase of 15%. Pleasingly, revenue has also lifted 291% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 149% as estimated by the dual analysts watching the company. With the industry only predicted to deliver 25%, the company is positioned for a stronger revenue result.

In light of this, it's curious that Shinry Technologies' P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

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

Shinry Technologies appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Looking at Shinry Technologies' analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

You should always think about risks. Case in point, we've spotted 2 warning signs for Shinry Technologies you should be aware 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.