Tianjin Printronics Circuit Corporation's (SZSE:002134) 49% Share Price Surge Not Quite Adding Up

Tianjin Printronics Circuit Corporation (SZSE:002134) shares have had a really impressive month, gaining 49% after a shaky period beforehand. Unfortunately, despite the strong performance over the last month, the full year gain of 9.1% isn't as attractive.

Even after such a large jump in price, you could still be forgiven for feeling indifferent about Tianjin Printronics Circuit's P/S ratio of 3.3x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in China is also close to 4x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Tianjin Printronics Circuit

What Does Tianjin Printronics Circuit's Recent Performance Look Like?

Tianjin Printronics Circuit certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Tianjin Printronics Circuit will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

Although there are no analyst estimates available for Tianjin Printronics Circuit, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Is There Some Revenue Growth Forecasted For Tianjin Printronics Circuit?

Tianjin Printronics Circuit's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 46% last year. The latest three year period has also seen an excellent 54% overall rise in revenue, aided by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing the recent medium-term revenue trends against the industry's one-year growth forecast of 27% shows it's noticeably less attractive.

With this information, we find it interesting that Tianjin Printronics Circuit is trading at a fairly similar P/S compared to the industry. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Tianjin Printronics Circuit's P/S Mean For Investors?

Tianjin Printronics Circuit's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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.

We've established that Tianjin Printronics Circuit's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless the recent medium-term conditions improve, it's hard to accept the current share price as fair value.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Tianjin Printronics Circuit that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.