Further Upside For Boji Medical Technology Co.,Ltd. (SZSE:300404) Shares Could Introduce Price Risks After 35% Bounce

Those holding Boji Medical Technology Co.,Ltd. (SZSE:300404) shares would be relieved that the share price has rebounded 35% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 31% over that time.

In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about Boji Medical TechnologyLtd's P/S ratio of 5.6x, since the median price-to-sales (or "P/S") ratio for the Life Sciences industry in China is also close to 5.3x. 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 Boji Medical TechnologyLtd

How Has Boji Medical TechnologyLtd Performed Recently?

Boji Medical TechnologyLtd has been doing a good job lately as it's been growing revenue at a solid pace. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on Boji Medical TechnologyLtd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Boji Medical TechnologyLtd will help you shine a light on its historical performance.

Is There Some Revenue Growth Forecasted For Boji Medical TechnologyLtd?

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

If we review the last year of revenue growth, the company posted a terrific increase of 30%. The strong recent performance means it was also able to grow revenue by 95% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 21% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's curious that Boji Medical TechnologyLtd's P/S sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Final Word

Boji Medical TechnologyLtd 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 didn't quite envision Boji Medical TechnologyLtd's P/S sitting in line with the wider industry, considering the revenue growth over the last three-year is higher than the current industry outlook. When we see strong revenue with faster-than-industry growth, we can only assume potential risks are what might be placing pressure on the P/S ratio. At least the risk of a price drop looks to be subdued if recent medium-term revenue trends continue, but investors seem to think future revenue could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Boji Medical TechnologyLtd 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.

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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.