Investors Still Aren't Entirely Convinced By Guangdong Jiayuan Technology Co.,Ltd.'s (SHSE:688388) Revenues Despite 33% Price Jump

Guangdong Jiayuan Technology Co.,Ltd. (SHSE:688388) shareholders would be excited to see that the share price has had a great month, posting a 33% gain and recovering from prior weakness. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 41% in the last twelve months.

Even after such a large jump in price, when close to half the companies operating in China's Electrical industry have price-to-sales ratios (or "P/S") above 2.1x, you may still consider Guangdong Jiayuan TechnologyLtd as an enticing stock to check out with its 1x P/S ratio. 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?

With revenue growth that's superior to most other companies of late, Guangdong Jiayuan TechnologyLtd has been doing relatively well. 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 Guangdong Jiayuan TechnologyLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Guangdong Jiayuan TechnologyLtd?

Guangdong Jiayuan TechnologyLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 11% last year. The latest three year period has also seen an excellent 165% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing revenues over that time.

Shifting to the future, estimates from the dual analysts covering the company suggest revenue should grow by 30% over the next year. With the industry only predicted to deliver 23%, the company is positioned for a stronger revenue result.

With this information, we find it odd that Guangdong Jiayuan TechnologyLtd is trading at a P/S lower than the industry. 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. 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.

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. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Having said that, be aware Guangdong Jiayuan TechnologyLtd is showing 1 warning sign in our investment analysis, you should know about.

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.