Subdued Growth No Barrier To Jiangsu Aisen Semiconductor Material Co.,Ltd. (SHSE:688720) With Shares Advancing 26%

Despite an already strong run, Jiangsu Aisen Semiconductor Material Co.,Ltd. (SHSE:688720) shares have been powering on, with a gain of 26% in the last thirty days. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

After such a large jump in price, Jiangsu Aisen Semiconductor MaterialLtd may be sending bearish signals at the moment with its price-to-sales (or "P/S") ratio of 10.8x, since almost half of all companies in the Semiconductor in China have P/S ratios under 7.3x and even P/S lower than 3x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

See our latest analysis for Jiangsu Aisen Semiconductor MaterialLtd

What Does Jiangsu Aisen Semiconductor MaterialLtd's P/S Mean For Shareholders?

Jiangsu Aisen Semiconductor MaterialLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

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Do Revenue Forecasts Match The High P/S Ratio?

In order to justify its P/S ratio, Jiangsu Aisen Semiconductor MaterialLtd would need to produce impressive growth in excess of the industry.

Taking a look back first, we see that the company grew revenue by an impressive 33% last year. The latest three year period has also seen an excellent 35% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 23% over the next year. That's shaping up to be materially lower than the 43% growth forecast for the broader industry.

With this in consideration, we believe it doesn't make sense that Jiangsu Aisen Semiconductor MaterialLtd's P/S is outpacing its industry peers. Apparently many investors in the company are way more bullish than analysts indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

The Bottom Line On Jiangsu Aisen Semiconductor MaterialLtd's P/S

Jiangsu Aisen Semiconductor MaterialLtd shares have taken a big step in a northerly direction, but its P/S is elevated as a result. 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.

We've concluded that Jiangsu Aisen Semiconductor MaterialLtd currently trades on a much higher than expected P/S since its forecast growth is lower than the wider industry. The weakness in the company's revenue estimate doesn't bode well for the elevated P/S, which could take a fall if the revenue sentiment doesn't improve. Unless these conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Plus, you should also learn about these 2 warning signs we've spotted with Jiangsu Aisen Semiconductor MaterialLtd (including 1 which can't be ignored).

If these risks are making you reconsider your opinion on Jiangsu Aisen Semiconductor MaterialLtd, 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.