There's No Escaping BOE HC SemiTek Corporation's (SZSE:300323) Muted Revenues Despite A 36% Share Price Rise

BOE HC SemiTek Corporation (SZSE:300323) shares have continued their recent momentum with a 36% gain in the last month alone. Looking further back, the 16% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, BOE HC SemiTek may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 3.5x, considering almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 7x and even P/S higher than 13x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for BOE HC SemiTek

What Does BOE HC SemiTek's P/S Mean For Shareholders?

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. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on BOE HC SemiTek will help you shine a light on its historical performance.

Do Revenue Forecasts Match The Low P/S Ratio?

BOE HC SemiTek's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 50%. The latest three year period has also seen a 20% overall rise in revenue, aided extensively by its short-term performance. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 51% shows it's noticeably less attractive.

In light of this, it's understandable that BOE HC SemiTek's P/S sits below the majority of other companies. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Key Takeaway

BOE HC SemiTek's recent share price jump still sees fails to bring its P/S alongside the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of BOE HC SemiTek revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. 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 need to take note of risks, for example - BOE HC SemiTek has 3 warning signs (and 2 which are significant) we think you should know about.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.