Investors Give Suzhou Gyz Electronic Technology Co.,Ltd (SHSE:688260) Shares A 28% Hiding

Suzhou Gyz Electronic Technology Co.,Ltd (SHSE:688260) shares have had a horrible month, losing 28% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 48% share price drop.

Since its price has dipped substantially, Suzhou Gyz Electronic TechnologyLtd's price-to-sales (or "P/S") ratio of 2.8x might make it look like a buy right now compared to the Electronic industry in China, where around half of the companies have P/S ratios above 4x and even P/S above 8x are quite common. 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 Suzhou Gyz Electronic TechnologyLtd

How Has Suzhou Gyz Electronic TechnologyLtd Performed Recently?

Suzhou Gyz Electronic TechnologyLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. 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.

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

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

In order to justify its P/S ratio, Suzhou Gyz Electronic TechnologyLtd would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company grew revenue by an impressive 20% last year. Revenue has also lifted 8.9% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Looking ahead now, revenue is anticipated to climb by 81% during the coming year according to the one analyst following the company. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

In light of this, it's peculiar that Suzhou Gyz Electronic TechnologyLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Key Takeaway

The southerly movements of Suzhou Gyz Electronic TechnologyLtd's shares means its P/S is now sitting at a pretty low level. 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.

A look at Suzhou Gyz Electronic TechnologyLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. It appears the market could be anticipating revenue instability, because these conditions should normally provide a boost to the share price.

Having said that, be aware Suzhou Gyz Electronic TechnologyLtd is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored.

If these risks are making you reconsider your opinion on Suzhou Gyz Electronic TechnologyLtd, 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.