Shanghai Awinic Technology Co.,Ltd. (SHSE:688798) Stock Catapults 25% Though Its Price And Business Still Lag The Industry

Shanghai Awinic Technology Co.,Ltd. (SHSE:688798) shares have had a really impressive month, gaining 25% after a shaky period beforehand. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 12% over that time.

In spite of the firm bounce in price, Shanghai Awinic TechnologyLtd's price-to-sales (or "P/S") ratio of 4.3x might still 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 5.4x and even P/S above 10x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for Shanghai Awinic TechnologyLtd

How Has Shanghai Awinic TechnologyLtd Performed Recently?

Recent times have been advantageous for Shanghai Awinic TechnologyLtd as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

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

Retrospectively, the last year delivered an exceptional 72% gain to the company's top line. Pleasingly, revenue has also lifted 55% in aggregate from three years ago, thanks to the last 12 months of growth. 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 eight analysts covering the company suggest revenue should grow by 14% over the next year. That's shaping up to be materially lower than the 36% growth forecast for the broader industry.

With this in consideration, its clear as to why Shanghai Awinic TechnologyLtd's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Shanghai Awinic TechnologyLtd's P/S

The latest share price surge wasn't enough to lift Shanghai Awinic TechnologyLtd's P/S close to the industry median. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Shanghai Awinic TechnologyLtd's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. The company will need a change of fortune to justify the P/S rising higher in the future.

Plus, you should also learn about this 1 warning sign we've spotted with Shanghai Awinic TechnologyLtd.

If these risks are making you reconsider your opinion on Shanghai Awinic TechnologyLtd, 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.