Further Upside For Unionman Technology Co.,Ltd. (SHSE:688609) Shares Could Introduce Price Risks After 25% Bounce

Unionman Technology Co.,Ltd. (SHSE:688609) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 2.9% in the last twelve months.

Even after such a large jump in price, Unionman TechnologyLtd may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 2x, considering almost half of all companies in the Communications industry in China have P/S ratios greater than 3.9x and even P/S higher than 7x 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.

See our latest analysis for Unionman TechnologyLtd

How Has Unionman TechnologyLtd Performed Recently?

Recent times haven't been great for Unionman TechnologyLtd as its revenue has been rising slower than most other companies. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. If you still like the company, you'd be hoping revenue doesn't get any worse and that you could 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 Unionman TechnologyLtd will help you uncover what's on the horizon.

How Is Unionman TechnologyLtd's Revenue Growth Trending?

Unionman TechnologyLtd'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, we see that the company managed to grow revenues by a handy 7.0% last year. The solid recent performance means it was also able to grow revenue by 9.2% in total over the last three years. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 69% as estimated by the only analyst watching the company. That's shaping up to be materially higher than the 42% growth forecast for the broader industry.

With this in consideration, we find it intriguing that Unionman TechnologyLtd's P/S sits behind most of its industry peers. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

The latest share price surge wasn't enough to lift Unionman TechnologyLtd's P/S close to the industry median. 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.

A look at Unionman TechnologyLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Unionman TechnologyLtd that you should be aware of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.