It's Down 26% But Puya Semiconductor (Shanghai) Co., Ltd. (SHSE:688766) Could Be Riskier Than It Looks

Puya Semiconductor (Shanghai) Co., Ltd. (SHSE:688766) shareholders won't be pleased to see that the share price has had a very rough month, dropping 26% and undoing the prior period's positive performance. The recent drop has obliterated the annual return, with the share price now down 5.0% over that longer period.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Puya Semiconductor (Shanghai)'s P/S ratio of 5.5x, since the median price-to-sales (or "P/S") ratio for the Semiconductor industry in China is also close to 5.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Puya Semiconductor (Shanghai)

What Does Puya Semiconductor (Shanghai)'s P/S Mean For Shareholders?

Puya Semiconductor (Shanghai) certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 not quite in favour.

Want the full picture on analyst estimates for the company? Then our free report on Puya Semiconductor (Shanghai) will help you uncover what's on the horizon.

Is There Some Revenue Growth Forecasted For Puya Semiconductor (Shanghai)?

In order to justify its P/S ratio, Puya Semiconductor (Shanghai) would need to produce growth that's similar to the industry.

Taking a look back first, we see that the company grew revenue by an impressive 47% last year. The strong recent performance means it was also able to grow revenue by 64% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 44% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 35%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Puya Semiconductor (Shanghai)'s P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Puya Semiconductor (Shanghai)'s P/S?

Puya Semiconductor (Shanghai)'s plummeting stock price has brought its P/S back to a similar region as the rest of the industry. 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.

Looking at Puya Semiconductor (Shanghai)'s analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. However, if you agree with the analysts' forecasts, you may be able to pick up the stock at an attractive price.

Plus, you should also learn about this 1 warning sign we've spotted with Puya Semiconductor (Shanghai).

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.