Investors Give Shenzhen Techwinsemi Technology Co., Ltd. (SZSE:001309) Shares A 29% Hiding

Shenzhen Techwinsemi Technology Co., Ltd. (SZSE:001309) shares have had a horrible month, losing 29% after a relatively good period beforehand. Longer-term, the stock has been solid despite a difficult 30 days, gaining 24% in the last year.

Even after such a large drop in price, it's still not a stretch to say that Shenzhen Techwinsemi Technology's price-to-sales (or "P/S") ratio of 4.6x right now seems quite "middle-of-the-road" compared to the Semiconductor industry in China, where the median P/S ratio is around 5.5x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

Check out our latest analysis for Shenzhen Techwinsemi Technology

What Does Shenzhen Techwinsemi Technology's P/S Mean For Shareholders?

Shenzhen Techwinsemi 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 this level of performance to taper off, keeping the P/S from soaring. 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.

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

How Is Shenzhen Techwinsemi Technology's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a terrific increase of 84%. Pleasingly, revenue has also lifted 150% 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.

Turning to the outlook, the next year should generate growth of 58% as estimated by the dual analysts watching the company. That's shaping up to be materially higher than the 35% growth forecast for the broader industry.

In light of this, it's curious that Shenzhen Techwinsemi Technology's P/S sits in line with the majority of other companies. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What Does Shenzhen Techwinsemi Technology's P/S Mean For Investors?

Following Shenzhen Techwinsemi Technology's share price tumble, its P/S is just clinging on to the industry median P/S. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Despite enticing revenue growth figures that outpace the industry, Shenzhen Techwinsemi Technology's P/S isn't quite what we'd expect. 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.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Shenzhen Techwinsemi Technology that you should be aware of.

If these risks are making you reconsider your opinion on Shenzhen Techwinsemi 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.