Further Upside For Nanjing Sciyon Wisdom Technology Group Co., Ltd. (SZSE:002380) Shares Could Introduce Price Risks After 25% Bounce

Those holding Nanjing Sciyon Wisdom Technology Group Co., Ltd. (SZSE:002380) shares would be relieved that the share price has rebounded 25% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 22% in the last twelve months.

Even after such a large jump in price, Nanjing Sciyon Wisdom Technology Group's price-to-sales (or "P/S") ratio of 2.9x 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 5.3x and even P/S above 9x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Nanjing Sciyon Wisdom Technology Group

What Does Nanjing Sciyon Wisdom Technology Group's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Nanjing Sciyon Wisdom Technology Group's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Nanjing Sciyon Wisdom Technology Group.

Do Revenue Forecasts Match The Low P/S Ratio?

Nanjing Sciyon Wisdom 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 3.2%. Even so, admirably revenue has lifted 44% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Looking ahead now, revenue is anticipated to climb by 66% during the coming year according to the sole analyst following the company. That's shaping up to be materially higher than the 33% growth forecast for the broader industry.

With this information, we find it odd that Nanjing Sciyon Wisdom Technology Group is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

Nanjing Sciyon Wisdom Technology Group's stock price has surged recently, but its but its P/S still remains modest. 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.

A look at Nanjing Sciyon Wisdom Technology Group's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

It is also worth noting that we have found 1 warning sign for Nanjing Sciyon Wisdom Technology Group that you need to take into consideration.

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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