Improved Revenues Required Before BOE HC SemiTek Corporation (SZSE:300323) Stock's 30% Jump Looks Justified

Despite an already strong run, BOE HC SemiTek Corporation (SZSE:300323) shares have been powering on, with a gain of 30% 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.

Even after such a large jump in price, BOE HC SemiTek may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.8x, since almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 6.9x and even P/S higher than 12x are not unusual. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for BOE HC SemiTek

How BOE HC SemiTek Has Been Performing

With revenue growth that's exceedingly strong of late, BOE HC SemiTek has been doing very well. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. Those who are bullish on BOE HC SemiTek will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on BOE HC SemiTek's earnings, revenue and cash flow.

Is There Any Revenue Growth Forecasted For BOE HC SemiTek?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like BOE HC SemiTek's to be considered reasonable.

Taking a look back first, we see that the company grew revenue by an impressive 41% last year. Pleasingly, revenue has also lifted 91% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 41% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's understandable that BOE HC SemiTek's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What We Can Learn From BOE HC SemiTek's P/S?

Shares in BOE HC SemiTek have risen appreciably however, its P/S is still subdued. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

In line with expectations, BOE HC SemiTek maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - BOE HC SemiTek has 2 warning signs we think you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.