LianChuang Electronic Technology Co.,Ltd (SZSE:002036) Stock Catapults 34% Though Its Price And Business Still Lag The Industry

LianChuang Electronic Technology Co.,Ltd (SZSE:002036) shares have continued their recent momentum with a 34% gain in the last month alone. Unfortunately, despite the strong performance over the last month, the full year gain of 9.8% isn't as attractive.

Although its price has surged higher, LianChuang Electronic TechnologyLtd may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 1.1x, considering almost half of all companies in the Electronic industry in China have P/S ratios greater than 4.5x and even P/S higher than 9x 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.

Check out our latest analysis for LianChuang Electronic TechnologyLtd

What Does LianChuang Electronic TechnologyLtd's P/S Mean For Shareholders?

LianChuang Electronic TechnologyLtd 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.

Keen to find out how analysts think LianChuang Electronic TechnologyLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is LianChuang Electronic TechnologyLtd's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 3.8%. The latest three year period has also seen a 17% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 15% as estimated by the six analysts watching the company. Meanwhile, the rest of the industry is forecast to expand by 27%, which is noticeably more attractive.

With this in consideration, its clear as to why LianChuang Electronic TechnologyLtd's P/S is falling short industry peers. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On LianChuang Electronic TechnologyLtd's P/S

Shares in LianChuang Electronic TechnologyLtd have risen appreciably however, its P/S is still subdued. 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.

As expected, our analysis of LianChuang Electronic TechnologyLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 2 warning signs for LianChuang Electronic TechnologyLtd (1 doesn't sit too well with us!) that you need to take into consideration.

If you're unsure about the strength of LianChuang Electronic TechnologyLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.