Insufficient Growth At BIWIN Storage Technology Co., Ltd. (SHSE:688525) Hampers Share Price

BIWIN Storage Technology Co., Ltd.'s (SHSE:688525) price-to-sales (or "P/S") ratio of 3.8x might 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 6.4x and even P/S above 11x 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.

See our latest analysis for BIWIN Storage Technology

What Does BIWIN Storage Technology's P/S Mean For Shareholders?

BIWIN Storage Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Keen to find out how analysts think BIWIN Storage Technology's future stacks up against the industry? In that case, our free report is a great place to start.

How Is BIWIN Storage Technology's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like BIWIN Storage Technology's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 122% gain to the company's top line. The latest three year period has also seen an excellent 149% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 24% as estimated by the three analysts watching the company. With the industry predicted to deliver 54% growth, the company is positioned for a weaker revenue result.

With this in consideration, its clear as to why BIWIN Storage Technology's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From BIWIN Storage Technology's P/S?

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 BIWIN Storage Technology's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for BIWIN Storage Technology (1 shouldn't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on BIWIN Storage Technology, 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.