Semitronix Corporation (SZSE:301095) Stocks Shoot Up 25% But Its P/S Still Looks Reasonable

Those holding Semitronix Corporation (SZSE:301095) 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. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.

After such a large jump in price, when almost half of the companies in China's Software industry have price-to-sales ratios (or "P/S") below 8x, you may consider Semitronix as a stock not worth researching with its 23.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

View our latest analysis for Semitronix

What Does Semitronix's P/S Mean For Shareholders?

With revenue growth that's superior to most other companies of late, Semitronix has been doing relatively well. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

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

What Are Revenue Growth Metrics Telling Us About The High P/S?

Semitronix'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 the company grew revenue by an impressive 17% last year. The latest three year period has also seen an excellent 157% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 66% during the coming year according to the four analysts following the company. With the industry only predicted to deliver 27%, the company is positioned for a stronger revenue result.

With this information, we can see why Semitronix is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does Semitronix's P/S Mean For Investors?

The strong share price surge has lead to Semitronix's P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

Our look into Semitronix shows that its P/S ratio remains high on the merit of its strong future revenues. 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.

Plus, you should also learn about these 3 warning signs we've spotted with Semitronix (including 2 which are a bit concerning).

If these risks are making you reconsider your opinion on Semitronix, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.