Further Upside For BlueFocus Intelligent Communications Group Co., Ltd. (SZSE:300058) Shares Could Introduce Price Risks After 27% Bounce

BlueFocus Intelligent Communications Group Co., Ltd. (SZSE:300058) shares have had a really impressive month, gaining 27% after a shaky period beforehand. Looking back a bit further, it's encouraging to see the stock is up 59% in the last year.

Even after such a large jump in price, BlueFocus Intelligent Communications Group may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.4x, since almost half of all companies in the Media industry in China have P/S ratios greater than 3.7x and even P/S higher than 6x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for BlueFocus Intelligent Communications Group

How BlueFocus Intelligent Communications Group Has Been Performing

With revenue growth that's superior to most other companies of late, BlueFocus Intelligent Communications Group 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.

Want the full picture on analyst estimates for the company? Then our free report on BlueFocus Intelligent Communications Group will help you uncover what's on the horizon.

How Is BlueFocus Intelligent Communications Group's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as BlueFocus Intelligent Communications Group's is when the company's growth is on track to lag the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 33%. Pleasingly, revenue has also lifted 43% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the four analysts covering the company suggest revenue should grow by 12% over the next year. With the industry predicted to deliver 11% growth , the company is positioned for a comparable revenue result.

With this in consideration, we find it intriguing that BlueFocus Intelligent Communications Group's P/S is lagging behind its industry peers. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From BlueFocus Intelligent Communications Group's P/S?

Shares in BlueFocus Intelligent Communications Group have risen appreciably however, its P/S is still subdued. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It looks to us like the P/S figures for BlueFocus Intelligent Communications Group remain low despite growth that is expected to be in line with other companies in the industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

It is also worth noting that we have found 1 warning sign for BlueFocus Intelligent Communications Group that you need to take into consideration.

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.