Shanghai Bright Power Semiconductor Co., Ltd. (SHSE:688368) Stock Catapults 26% Though Its Price And Business Still Lag The Industry

Shanghai Bright Power Semiconductor Co., Ltd. (SHSE:688368) shareholders are no doubt pleased to see that the share price has bounced 26% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 45% in the last twelve months.

Even after such a large jump in price, Shanghai Bright Power Semiconductor may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4x, considering almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 6.6x and even P/S higher than 12x 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 Shanghai Bright Power Semiconductor

How Shanghai Bright Power Semiconductor Has Been Performing

Recent revenue growth for Shanghai Bright Power Semiconductor has been in line with the industry. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on Shanghai Bright Power Semiconductor will be hoping that this isn't the case.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Shanghai Bright Power Semiconductor.

Is There Any Revenue Growth Forecasted For Shanghai Bright Power Semiconductor?

In order to justify its P/S ratio, Shanghai Bright Power Semiconductor would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered an exceptional 21% gain to the company's top line. The latest three year period has also seen a 18% overall rise in revenue, aided extensively by its short-term performance. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 52% over the next year. With the industry predicted to deliver 20,706% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Shanghai Bright Power Semiconductor is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

The latest share price surge wasn't enough to lift Shanghai Bright Power Semiconductor's P/S close to the industry median. 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 expected, our analysis of Shanghai Bright Power Semiconductor's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. 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.

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

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.