A Piece Of The Puzzle Missing From Guangdong Jiayuan Technology Co.,Ltd.'s (SHSE:688388) 37% Share Price Climb

Guangdong Jiayuan Technology Co.,Ltd. (SHSE:688388) shares have continued their recent momentum with a 37% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 30% in the last twelve months.

Even after such a large jump in price, Guangdong Jiayuan TechnologyLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.1x, since almost half of all companies in the Electrical industry in China have P/S ratios greater than 2.5x and even P/S higher than 5x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Guangdong Jiayuan TechnologyLtd

What Does Guangdong Jiayuan TechnologyLtd's Recent Performance Look Like?

Guangdong Jiayuan TechnologyLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

How Is Guangdong Jiayuan TechnologyLtd's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 11%. This was backed up an excellent period prior to see revenue up by 133% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 36% as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 26% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Guangdong Jiayuan TechnologyLtd's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

Despite Guangdong Jiayuan TechnologyLtd's share price climbing recently, its P/S still lags most other companies. 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.

Guangdong Jiayuan TechnologyLtd's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Guangdong Jiayuan TechnologyLtd that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.