Market Might Still Lack Some Conviction On Jiangsu Gian Technology Co., Ltd. (SZSE:300709) Even After 29% Share Price Boost

Jiangsu Gian Technology Co., Ltd. (SZSE:300709) shareholders would be excited to see that the share price has had a great month, posting a 29% gain and recovering from prior weakness. The last 30 days bring the annual gain to a very sharp 32%.

Even after such a large jump in price, it's still not a stretch to say that Jiangsu Gian Technology's price-to-sales (or "P/S") ratio of 2.4x right now seems quite "middle-of-the-road" compared to the Electrical industry in China, where the median P/S ratio is around 1.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for Jiangsu Gian Technology

What Does Jiangsu Gian Technology's Recent Performance Look Like?

While the industry has experienced revenue growth lately, Jiangsu Gian Technology's revenue has gone into reverse gear, which is not great. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Jiangsu Gian Technology will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Jiangsu Gian Technology?

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

Retrospectively, the last year delivered a frustrating 3.7% decrease to the company's top line. Still, the latest three year period has seen an excellent 32% overall rise in revenue, in spite of its unsatisfying short-term performance. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 29% as estimated by the two analysts watching the company. That's shaping up to be materially higher than the 24% growth forecast for the broader industry.

With this information, we find it interesting that Jiangsu Gian Technology is trading at a fairly similar P/S compared to the industry. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

The Final Word

Jiangsu Gian Technology 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.

We've established that Jiangsu Gian Technology currently trades on a lower than expected P/S since its forecasted revenue growth is higher than the wider industry. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. It appears some are indeed anticipating revenue instability, because these conditions should normally provide a boost to the share price.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Jiangsu Gian Technology that you should be aware of.

If you're unsure about the strength of Jiangsu Gian Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.