Triductor Technology (Suzhou) Inc.'s (SHSE:688259) Shares Climb 45% But Its Business Is Yet to Catch Up

Triductor Technology (Suzhou) Inc. (SHSE:688259) shareholders have had their patience rewarded with a 45% share price jump in the last month. The last 30 days bring the annual gain to a very sharp 30%.

Following the firm bounce in price, Triductor Technology (Suzhou) may be sending sell signals at present with a price-to-sales (or "P/S") ratio of 10.3x, when you consider almost half of the companies in the Semiconductor industry in China have P/S ratios under 7.8x and even P/S lower than 3x 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 elevated P/S.

Check out our latest analysis for Triductor Technology (Suzhou)

What Does Triductor Technology (Suzhou)'s Recent Performance Look Like?

For example, consider that Triductor Technology (Suzhou)'s financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/S from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Triductor Technology (Suzhou) will help you shine a light on its historical performance.

How Is Triductor Technology (Suzhou)'s Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as high as Triductor Technology (Suzhou)'s is when the company's growth is on track to outshine the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 10%. As a result, revenue from three years ago have also fallen 7.5% overall. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 46% shows it's an unpleasant look.

In light of this, it's alarming that Triductor Technology (Suzhou)'s P/S sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What We Can Learn From Triductor Technology (Suzhou)'s P/S?

Triductor Technology (Suzhou) shares have taken a big step in a northerly direction, but its P/S is elevated as a result. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Triductor Technology (Suzhou) revealed its shrinking revenue over the medium-term isn't resulting in a P/S as low as we expected, given the industry is set to grow. With a revenue decline on investors' minds, the likelihood of a souring sentiment is quite high which could send the P/S back in line with what we'd expect. Unless the recent medium-term conditions improve markedly, investors will have a hard time accepting the share price as fair value.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Triductor Technology (Suzhou) (at least 1 which is concerning), and understanding these should be part of your investment process.

If you're unsure about the strength of Triductor Technology (Suzhou)'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.