Leascend Technology Co., Ltd's (SZSE:300051) 52% Jump Shows Its Popularity With Investors

Leascend Technology Co., Ltd (SZSE:300051) shareholders are no doubt pleased to see that the share price has bounced 52% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 18% in the last twelve months.

Following the firm bounce in price, when almost half of the companies in China's IT industry have price-to-sales ratios (or "P/S") below 3.7x, you may consider Leascend Technology as a stock not worth researching with its 20.1x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

See our latest analysis for Leascend Technology

How Leascend Technology Has Been Performing

There hasn't been much to differentiate Leascend Technology's and the industry's revenue growth lately. It might be that many expect the mediocre revenue performance to strengthen positively, which has kept the P/S ratio from falling. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on Leascend Technology will help you uncover what's on the horizon.

How Is Leascend Technology's Revenue Growth Trending?

Leascend Technology's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. This isn't what shareholders were looking for as it means they've been left with a 24% decline in revenue over the last three years in total. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 1,305% during the coming year according to the lone analyst following the company. That's shaping up to be materially higher than the 41% growth forecast for the broader industry.

With this in mind, it's not hard to understand why Leascend Technology's P/S is high relative to its industry peers. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Leascend Technology's P/S

The strong share price surge has lead to Leascend Technology's P/S soaring as well. 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 Leascend Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the IT industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

You always need to take note of risks, for example - Leascend Technology has 1 warning sign we think you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.