Visionox Technology Inc. (SZSE:002387) Shares Fly 40% But Investors Aren't Buying For Growth

The Visionox Technology Inc. (SZSE:002387) share price has done very well over the last month, posting an excellent gain of 40%. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 12% over that time.

Even after such a large jump in price, Visionox Technology may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.7x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 4.2x and even P/S higher than 8x are not unusual. 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 Visionox Technology

What Does Visionox Technology's Recent Performance Look Like?

With revenue growth that's inferior to most other companies of late, Visionox Technology has been relatively sluggish. Perhaps the market is expecting the current trend of poor revenue growth to continue, which has kept the P/S suppressed. 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 Visionox Technology.

Is There Any Revenue Growth Forecasted For Visionox Technology?

There's an inherent assumption that a company should far underperform the industry for P/S ratios like Visionox Technology's to be considered reasonable.

Retrospectively, the last year delivered a decent 6.0% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 43% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 16% as estimated by the sole analyst watching the company. That's shaping up to be materially lower than the 27% growth forecast for the broader industry.

With this information, we can see why Visionox Technology 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.

What Does Visionox Technology's P/S Mean For Investors?

Visionox Technology's recent share price jump still sees fails to bring its P/S alongside the industry median. 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 Visionox Technology 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. The company will need a change of fortune to justify the P/S rising higher in the future.

We don't want to rain on the parade too much, but we did also find 1 warning sign for Visionox Technology that you need to be mindful of.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.