What Tianjin Printronics Circuit Corporation's (SZSE:002134) 33% Share Price Gain Is Not Telling You

Despite an already strong run, Tianjin Printronics Circuit Corporation (SZSE:002134) shares have been powering on, with a gain of 33% in the last thirty days. The annual gain comes to 105% following the latest surge, making investors sit up and take notice.

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 5x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in China is also close to 4.5x. 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?

With revenue growth that's exceedingly strong of late, Tianjin Printronics Circuit has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. If that doesn't eventuate, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

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.

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

The only time you'd be comfortable seeing a P/S like Tianjin Printronics Circuit's is when the company's growth is tracking the industry closely.

If we review the last year of revenue growth, the company posted a terrific increase of 76%. The strong recent performance means it was also able to grow revenue by 64% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 27% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this information, we find it interesting that Tianjin Printronics Circuit is trading at a fairly similar P/S compared to the industry. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. 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 appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Tianjin Printronics Circuit revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Tianjin Printronics Circuit (2 shouldn't be ignored!) that you need to be mindful of.

If these risks are making you reconsider your opinion on Tianjin Printronics Circuit, 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.