Benign Growth For Hangzhou Silan Microelectronics Co.,Ltd (SHSE:600460) Underpins Its Share Price

You may think that with a price-to-sales (or "P/S") ratio of 3.9x Hangzhou Silan Microelectronics Co.,Ltd (SHSE:600460) is a stock worth checking out, seeing as almost half of all the Semiconductor companies in China have P/S ratios greater than 6.8x and even P/S higher than 12x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

See our latest analysis for Hangzhou Silan MicroelectronicsLtd

How Hangzhou Silan MicroelectronicsLtd Has Been Performing

Recent revenue growth for Hangzhou Silan MicroelectronicsLtd has been in line with the industry. One possibility is that the P/S ratio is low because investors think this modest revenue performance may begin to slide. If you like the company, you'd be hoping this isn't the case so that you could pick up some stock while it's out of favour.

Keen to find out how analysts think Hangzhou Silan MicroelectronicsLtd'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 Hangzhou Silan MicroelectronicsLtd?

The only time you'd be truly comfortable seeing a P/S as low as Hangzhou Silan MicroelectronicsLtd'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 19% last year. The strong recent performance means it was also able to grow revenue by 62% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 15% per annum during the coming three years according to the twelve analysts following the company. That's shaping up to be materially lower than the 58% per year growth forecast for the broader industry.

In light of this, it's understandable that Hangzhou Silan MicroelectronicsLtd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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 Hangzhou Silan MicroelectronicsLtd maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 1 warning sign for Hangzhou Silan MicroelectronicsLtd that you should be aware of.

If these risks are making you reconsider your opinion on Hangzhou Silan MicroelectronicsLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.