The Market Lifts Shinry Technologies Co., Ltd. (SZSE:300745) Shares 34% But It Can Do More

Shinry Technologies Co., Ltd. (SZSE:300745) shareholders would be excited to see that the share price has had a great month, posting a 34% gain and recovering from prior weakness. But the last month did very little to improve the 50% share price decline over the last year.

In spite of the firm bounce in price, there still wouldn't be many who think Shinry Technologies' price-to-sales (or "P/S") ratio of 2x is worth a mention when it essentially matches the median P/S in China's Auto Components industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

View our latest analysis for Shinry Technologies

How Has Shinry Technologies Performed Recently?

For instance, Shinry Technologies' receding revenue in recent times would have to be some food for thought. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Shinry Technologies will help you shine a light on its historical performance.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 18% decrease to the company's top line. Even so, admirably revenue has lifted 127% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 23% shows it's noticeably more attractive.

In light of this, it's curious that Shinry Technologies' P/S sits in line with the majority of other companies. Apparently some shareholders believe the recent performance is at its limits and have been accepting lower selling prices.

The Bottom Line On Shinry Technologies' P/S

Its shares have lifted substantially and now Shinry Technologies' P/S is back within range of the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Shinry Technologies currently trades on a lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. There could be some unobserved threats to revenue preventing the P/S ratio from matching this positive performance. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Shinry Technologies 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.