The Market Lifts Nanjing Sciyon Wisdom Technology Group Co., Ltd. (SZSE:002380) Shares 32% But It Can Do More

Nanjing Sciyon Wisdom Technology Group Co., Ltd. (SZSE:002380) shareholders would be excited to see that the share price has had a great month, posting a 32% gain and recovering from prior weakness. Notwithstanding the latest gain, the annual share price return of 6.7% isn't as impressive.

Even after such a large jump in price, Nanjing Sciyon Wisdom Technology Group may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.2x, since almost half of all companies in the Software industry in China have P/S ratios greater than 5.8x and even P/S higher than 10x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

View our latest analysis for Nanjing Sciyon Wisdom Technology Group

How Has Nanjing Sciyon Wisdom Technology Group Performed Recently?

With revenue growth that's superior to most other companies of late, Nanjing Sciyon Wisdom Technology Group has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

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

Is There Any Revenue Growth Forecasted For Nanjing Sciyon Wisdom Technology Group?

The only time you'd be truly comfortable seeing a P/S as low as Nanjing Sciyon Wisdom Technology Group's is when the company's growth is on track to lag the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 18%. The strong recent performance means it was also able to grow revenue by 65% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 47% during the coming year according to the lone analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 27%, which is noticeably less attractive.

With this in consideration, we find it intriguing that Nanjing Sciyon Wisdom Technology Group's P/S sits behind most of its industry peers. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

The latest share price surge wasn't enough to lift Nanjing Sciyon Wisdom Technology Group's P/S close to 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.

Nanjing Sciyon Wisdom Technology Group's analyst forecasts revealed that its superior revenue outlook isn't contributing to its P/S anywhere near as much as we would have predicted. 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.

Many other vital risk factors can be found on the company's balance sheet. Take a look at our free balance sheet analysis for Nanjing Sciyon Wisdom Technology Group with six simple checks on some of these key factors.

If you're unsure about the strength of Nanjing Sciyon Wisdom Technology Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.