The Price Is Right For Yuanjie Semiconductor Technology Co., Ltd. (SHSE:688498) Even After Diving 25%

The Yuanjie Semiconductor Technology Co., Ltd. (SHSE:688498) share price has fared very poorly over the last month, falling by a substantial 25%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 13% share price drop.

Although its price has dipped substantially, Yuanjie Semiconductor Technology may still be sending very bearish signals at the moment with a price-to-sales (or "P/S") ratio of 37.7x, since almost half of all companies in the Semiconductor industry in China have P/S ratios under 7.5x and even P/S lower than 3x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

Check out our latest analysis for Yuanjie Semiconductor Technology

How Has Yuanjie Semiconductor Technology Performed Recently?

Yuanjie Semiconductor Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

How Is Yuanjie Semiconductor Technology's Revenue Growth Trending?

Yuanjie Semiconductor Technology's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 75% last year. Revenue has also lifted 8.6% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 94% as estimated by the eight analysts watching the company. With the industry only predicted to deliver 45%, the company is positioned for a stronger revenue result.

With this information, we can see why Yuanjie Semiconductor Technology is trading at such a high P/S compared to the industry. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Yuanjie Semiconductor Technology's P/S

A significant share price dive has done very little to deflate Yuanjie Semiconductor Technology's very lofty P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look into Yuanjie Semiconductor Technology shows that its P/S ratio remains high on the merit of its strong future revenues. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless these conditions change, they will continue to provide strong support to the share price.

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

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.