Focuslight Technologies Inc's (SHSE:688167) P/S Is Still On The Mark Following 28% Share Price Bounce

Despite an already strong run, Focuslight Technologies Inc (SHSE:688167) shares have been powering on, with a gain of 28% in the last thirty days. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 43% in the last twelve months.

After such a large jump in price, Focuslight Technologies may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 10x, since almost half of all companies in the Semiconductor in China have P/S ratios under 7.3x and even P/S lower than 3x are not unusual. However, the P/S might be high for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Focuslight Technologies

How Has Focuslight Technologies Performed Recently?

There hasn't been much to differentiate Focuslight Technologies' and the industry's revenue growth lately. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

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

How Is Focuslight Technologies' Revenue Growth Trending?

In order to justify its P/S ratio, Focuslight Technologies would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 18% last year. The latest three year period has also seen an excellent 45% overall rise in revenue, aided by its short-term performance. 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 five analysts covering the company suggest revenue should grow by 58% over the next year. That's shaping up to be materially higher than the 43% growth forecast for the broader industry.

In light of this, it's understandable that Focuslight Technologies' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Focuslight Technologies' P/S Mean For Investors?

Focuslight Technologies' P/S is on the rise since its shares have risen strongly. 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.

As we suspected, our examination of Focuslight Technologies' analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Focuslight Technologies that you need to be mindful of.

If you're unsure about the strength of Focuslight Technologies' business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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.