Beijing Thunisoft Co., Ltd. (SZSE:300271) Stock Catapults 48% Though Its Price And Business Still Lag The Industry

Despite an already strong run, Beijing Thunisoft Co., Ltd. (SZSE:300271) shares have been powering on, with a gain of 48% in the last thirty days. While recent buyers may be laughing, long-term holders might not be as pleased since the recent gain only brings the stock back to where it started a year ago.

Although its price has surged higher, Beijing Thunisoft may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 4.2x, considering almost half of all companies in the Software industry in China have P/S ratios greater than 7.4x and even P/S higher than 13x aren't out of the ordinary. 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 Beijing Thunisoft

What Does Beijing Thunisoft's Recent Performance Look Like?

Beijing Thunisoft could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. 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.

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

How Is Beijing Thunisoft's Revenue Growth Trending?

Beijing Thunisoft'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.

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 4.9%. As a result, revenue from three years ago have also fallen 65% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 18% over the next year. With the industry predicted to deliver 33% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Beijing Thunisoft is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Beijing Thunisoft'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.

As we suspected, our examination of Beijing Thunisoft's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

There are also other vital risk factors to consider before investing and we've discovered 2 warning signs for Beijing Thunisoft that you should be aware 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.