Beijing Teamsun Technology Co.,Ltd.'s (SHSE:600410) Shares Bounce 28% But Its Business Still Trails The Industry

Despite an already strong run, Beijing Teamsun Technology Co.,Ltd. (SHSE:600410) shares have been powering on, with a gain of 28% in the last thirty days. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 8.1% over the last year.

Even after such a large jump in price, Beijing Teamsun TechnologyLtd 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 IT industry in China have P/S ratios greater than 4.6x and even P/S higher than 9x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Beijing Teamsun TechnologyLtd

What Does Beijing Teamsun TechnologyLtd's P/S Mean For Shareholders?

For instance, Beijing Teamsun TechnologyLtd's receding revenue in recent times would have to be some food for thought. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Although there are no analyst estimates available for Beijing Teamsun TechnologyLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

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

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 2.9%. Regardless, revenue has managed to lift by a handy 12% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing that to the industry, which is predicted to deliver 20% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we can see why Beijing Teamsun TechnologyLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Beijing Teamsun TechnologyLtd's P/S

Beijing Teamsun TechnologyLtd's recent share price jump still sees fails to bring its P/S alongside the industry median. 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.

Our examination of Beijing Teamsun TechnologyLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

You should always think about risks. Case in point, we've spotted 1 warning sign for Beijing Teamsun TechnologyLtd you should be aware of.

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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