Jiangsu Lettall Electronic Co.,Ltd (SHSE:603629) Held Back By Insufficient Growth Even After Shares Climb 26%

The Jiangsu Lettall Electronic Co.,Ltd (SHSE:603629) share price has done very well over the last month, posting an excellent gain of 26%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 33% over that time.

Even after such a large jump in price, Jiangsu Lettall ElectronicLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.8x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 4.4x and even P/S higher than 9x 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.

See our latest analysis for Jiangsu Lettall ElectronicLtd

What Does Jiangsu Lettall ElectronicLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Jiangsu Lettall ElectronicLtd over the last year, which is not ideal at all. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Although there are no analyst estimates available for Jiangsu Lettall ElectronicLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is Jiangsu Lettall ElectronicLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as Jiangsu Lettall ElectronicLtd's is when the company's growth is on track to lag the industry.

Retrospectively, the last year delivered a frustrating 11% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 6.8% overall rise in revenue. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 26% shows it's noticeably less attractive.

With this in consideration, it's easy to understand why Jiangsu Lettall ElectronicLtd's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What We Can Learn From Jiangsu Lettall ElectronicLtd's P/S?

Despite Jiangsu Lettall ElectronicLtd's share price climbing recently, its P/S still lags most other companies. 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.

Our examination of Jiangsu Lettall ElectronicLtd confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Having said that, be aware Jiangsu Lettall ElectronicLtd is showing 1 warning sign in our investment analysis, you should know about.

If these risks are making you reconsider your opinion on Jiangsu Lettall ElectronicLtd, 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.