A Piece Of The Puzzle Missing From Shenzhen Injoinic Technology Co.,Ltd.'s (SHSE:688209) 29% Share Price Climb

Those holding Shenzhen Injoinic Technology Co.,Ltd. (SHSE:688209) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 31% in the last twelve months.

Even after such a large jump in price, Shenzhen Injoinic TechnologyLtd's price-to-sales (or "P/S") ratio of 5.2x might still make it look like a buy right now compared to the Semiconductor industry in China, where around half of the companies have P/S ratios above 6.5x and even P/S above 12x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Shenzhen Injoinic TechnologyLtd

How Has Shenzhen Injoinic TechnologyLtd Performed Recently?

Shenzhen Injoinic TechnologyLtd certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Although there are no analyst estimates available for Shenzhen Injoinic TechnologyLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Shenzhen Injoinic TechnologyLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Shenzhen Injoinic TechnologyLtd would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 40% last year. Pleasingly, revenue has also lifted 213% 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.

Comparing that to the industry, which is only predicted to deliver 37% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Shenzhen Injoinic TechnologyLtd's P/S isn't as high compared to that of its industry peers. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Final Word

Shenzhen Injoinic TechnologyLtd's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Shenzhen Injoinic TechnologyLtd revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. While recent revenue trends over the past medium-term suggest that the risk of a price decline is low, investors appear to perceive a likelihood of revenue fluctuations in the future.

There are also other vital risk factors to consider and we've discovered 2 warning signs for Shenzhen Injoinic TechnologyLtd (1 is significant!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on Shenzhen Injoinic TechnologyLtd, 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.