Beijing Tricolor Technology Co., Ltd's (SHSE:603516) P/S Is Still On The Mark Following 28% Share Price Bounce

Beijing Tricolor Technology Co., Ltd (SHSE:603516) shareholders have had their patience rewarded with a 28% share price jump in the last month. Looking back a bit further, it's encouraging to see the stock is up 66% in the last year.

Since its price has surged higher, Beijing Tricolor Technology may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 14.5x, when you consider almost half of the companies in the Electronic industry in China have P/S ratios under 4.5x and even P/S lower than 2x aren't out of the ordinary. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Beijing Tricolor Technology

What Does Beijing Tricolor Technology's Recent Performance Look Like?

Beijing Tricolor Technology could be doing better as it's been growing revenue less than most other companies lately. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. 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 Beijing Tricolor Technology will help you uncover what's on the horizon.

How Is Beijing Tricolor Technology's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as steep as Beijing Tricolor Technology's is when the company's growth is on track to outshine the industry decidedly.

Taking a look back first, we see that the company managed to grow revenues by a handy 9.1% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 1.7% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 57% during the coming year according to the only analyst following the company. With the industry only predicted to deliver 27%, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Beijing Tricolor Technology's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Beijing Tricolor Technology's P/S

The strong share price surge has lead to Beijing Tricolor Technology's P/S soaring as well. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

We've established that Beijing Tricolor Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic 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.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Beijing Tricolor Technology that you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.