There's No Escaping TCL Technology Group Corporation's (SZSE:000100) Muted Revenues

You may think that with a price-to-sales (or "P/S") ratio of 0.5x TCL Technology Group Corporation (SZSE:000100) is definitely a stock worth checking out, seeing as almost half of all the Electronic companies in China have P/S ratios greater than 4x and even P/S above 8x aren't out of the ordinary. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for TCL Technology Group

What Does TCL Technology Group's P/S Mean For Shareholders?

TCL Technology Group could be doing better as it's been growing revenue less than most other companies lately. It seems that many are expecting the uninspiring revenue performance to persist, which has repressed the growth of the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on TCL Technology Group.

Is There Any Revenue Growth Forecasted For TCL Technology Group?

The only time you'd be truly comfortable seeing a P/S as depressed as TCL Technology Group's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Still, the latest three year period has seen an excellent 39% overall rise in revenue, in spite of its uninspiring short-term performance. Accordingly, shareholders will be pleased, but also have some questions to ponder about the last 12 months.

Shifting to the future, estimates from the eleven analysts covering the company suggest revenue should grow by 11% over the next year. Meanwhile, the rest of the industry is forecast to expand by 26%, which is noticeably more attractive.

With this information, we can see why TCL Technology Group is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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 TCL Technology Group maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider and we've discovered 3 warning signs for TCL Technology Group (1 can't be ignored!) that you should be aware of before investing here.

If these risks are making you reconsider your opinion on TCL Technology Group, 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.