Improved Revenues Required Before Qi An Xin Technology Group Inc. (SHSE:688561) Stock's 41% Jump Looks Justified

The Qi An Xin Technology Group Inc. (SHSE:688561) share price has done very well over the last month, posting an excellent gain of 41%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 38% over that time.

Although its price has surged higher, Qi An Xin Technology Group's price-to-sales (or "P/S") ratio of 3.8x might still make it look like a buy right now compared to the Software industry in China, where around half of the companies have P/S ratios above 5.2x and even P/S above 9x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Qi An Xin Technology Group

How Has Qi An Xin Technology Group Performed Recently?

Qi An Xin Technology Group could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

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

Do Revenue Forecasts Match The Low P/S Ratio?

Qi An Xin Technology Group's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 15%. Regardless, revenue has managed to lift by a handy 25% in aggregate from three years ago, thanks to the earlier period of growth. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 16% per annum over the next three years. Meanwhile, the rest of the industry is forecast to expand by 21% each year, which is noticeably more attractive.

With this in consideration, its clear as to why Qi An Xin Technology Group's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Qi An Xin Technology Group's P/S?

Qi An Xin Technology Group's stock price has surged recently, but its but its P/S still remains modest. 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.

We've established that Qi An Xin Technology Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Qi An Xin Technology Group that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.