Tianjin Futong Information Science&Technology Co.,Ltd.'s (SZSE:000836) Price Is Right But Growth Is Lacking After Shares Rocket 39%

Tianjin Futong Information Science&Technology Co.,Ltd. (SZSE:000836) shareholders are no doubt pleased to see that the share price has bounced 39% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 40% in the last twelve months.

Even after such a large jump in price, Tianjin Futong Information Science&TechnologyLtd may still look like a strong buying opportunity 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 4.2x 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 so limited.

View our latest analysis for Tianjin Futong Information Science&TechnologyLtd

How Has Tianjin Futong Information Science&TechnologyLtd Performed Recently?

As an illustration, revenue has deteriorated at Tianjin Futong Information Science&TechnologyLtd 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. Those who are bullish on Tianjin Futong Information Science&TechnologyLtd will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tianjin Futong Information Science&TechnologyLtd will help you shine a light on its historical performance.

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

In order to justify its P/S ratio, Tianjin Futong Information Science&TechnologyLtd would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 15% decrease to the company's top line. That put a dampener on the good run it was having over the longer-term as its three-year revenue growth is still a noteworthy 15% in total. 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 that to the industry, which is predicted to deliver 52% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Tianjin Futong Information Science&TechnologyLtd's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Tianjin Futong Information Science&TechnologyLtd's P/S

Even after such a strong price move, Tianjin Futong Information Science&TechnologyLtd's P/S still trails the rest of the industry. 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.

In line with expectations, Tianjin Futong Information Science&TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you settle on your opinion, we've discovered 2 warning signs for Tianjin Futong Information Science&TechnologyLtd that you should be aware of.

If these risks are making you reconsider your opinion on Tianjin Futong Information Science&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.