Guangdong Jiayuan Technology Co.,Ltd.'s (SHSE:688388) Subdued P/S Might Signal An Opportunity

When you see that almost half of the companies in the Electrical industry in China have price-to-sales ratios (or "P/S") above 2.3x, Guangdong Jiayuan Technology Co.,Ltd. (SHSE:688388) looks to be giving off some buy signals with its 1.3x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Guangdong Jiayuan TechnologyLtd

How Has Guangdong Jiayuan TechnologyLtd Performed Recently?

Guangdong Jiayuan TechnologyLtd could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could pick up some stock while it's out of favour.

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

What Are Revenue Growth Metrics Telling Us About The Low P/S?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Guangdong Jiayuan TechnologyLtd's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 7.1%. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were fairly tame in comparison. 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 74% as estimated by the five analysts watching the company. With the industry only predicted to deliver 24%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Guangdong Jiayuan TechnologyLtd's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Guangdong Jiayuan TechnologyLtd's P/S

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. There could be some major risk factors that are placing downward 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 2 warning signs for Guangdong Jiayuan TechnologyLtd (1 is significant) you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.