Investors Still Aren't Entirely Convinced By Suncha Technology Co., Ltd.'s (SZSE:001211) Revenues Despite 34% Price Jump

Despite an already strong run, Suncha Technology Co., Ltd. (SZSE:001211) shares have been powering on, with a gain of 34% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 10% in the last twelve months.

Even after such a large jump in price, Suncha Technology may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 1.2x, considering almost half of all companies in the Consumer Durables industry in China have P/S ratios greater than 1.9x and even P/S higher than 4x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Suncha Technology

How Has Suncha Technology Performed Recently?

Revenue has risen firmly for Suncha Technology recently, which is pleasing to see. One possibility is that the P/S is low because investors think this respectable revenue growth might actually underperform the broader industry in the near future. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Suncha Technology's earnings, revenue and cash flow.

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

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

Taking a look back first, we see that the company grew revenue by an impressive 23% last year. As a result, it also grew revenue by 30% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 9.1% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this information, we find it odd that Suncha Technology is trading at a P/S lower than the industry. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Bottom Line On Suncha Technology's P/S

Despite Suncha Technology's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of Suncha Technology revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. It appears some are indeed anticipating revenue instability, because the persistence of these recent medium-term conditions should normally provide more support to the share price.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Suncha Technology that you should be aware 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.