Improved Revenues Required Before Hangzhou Silan Microelectronics Co.,Ltd (SHSE:600460) Stock's 47% Jump Looks Justified

The Hangzhou Silan Microelectronics Co.,Ltd (SHSE:600460) share price has done very well over the last month, posting an excellent gain of 47%. Unfortunately, despite the strong performance over the last month, the full year gain of 9.4% isn't as attractive.

In spite of the firm bounce in price, Hangzhou Silan MicroelectronicsLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4.5x, considering almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 7.4x and even P/S higher than 13x 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 Hangzhou Silan MicroelectronicsLtd

What Does Hangzhou Silan MicroelectronicsLtd's Recent Performance Look Like?

Recent times have been advantageous for Hangzhou Silan MicroelectronicsLtd as its revenues have been rising faster than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Want the full picture on analyst estimates for the company? Then our free report on Hangzhou Silan MicroelectronicsLtd will help you uncover what's on the horizon.

Is There Any Revenue Growth Forecasted For Hangzhou Silan MicroelectronicsLtd?

Hangzhou Silan MicroelectronicsLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. Pleasingly, revenue has also lifted 72% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 15% per year during the coming three years according to the twelve analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 41% per year, which is noticeably more attractive.

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 Final Word

Hangzhou Silan MicroelectronicsLtd's stock price has surged recently, but its but its P/S still remains modest. 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.

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. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. The company will need a change of fortune to justify the P/S rising higher in the future.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Hangzhou Silan MicroelectronicsLtd that you should be aware of.

If you're unsure about the strength of Hangzhou Silan MicroelectronicsLtd'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.