Stock Analysis
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- SZSE:002876
Slammed 25% Shenzhen Sunnypol Optoelectronics Co.,Ltd. (SZSE:002876) Screens Well Here But There Might Be A Catch
Shenzhen Sunnypol Optoelectronics Co.,Ltd. (SZSE:002876) shares have retraced a considerable 25% in the last month, reversing a fair amount of their solid recent performance. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 19% in that time.
Although its price has dipped substantially, Shenzhen Sunnypol OptoelectronicsLtd may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.8x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 3.9x 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 Shenzhen Sunnypol OptoelectronicsLtd
How Has Shenzhen Sunnypol OptoelectronicsLtd Performed Recently?
Recent times have been advantageous for Shenzhen Sunnypol OptoelectronicsLtd as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.
Want the full picture on analyst estimates for the company? Then our free report on Shenzhen Sunnypol OptoelectronicsLtd will help you uncover what's on the horizon.What Are Revenue Growth Metrics Telling Us About The Low P/S?
There's an inherent assumption that a company should far underperform the industry for P/S ratios like Shenzhen Sunnypol OptoelectronicsLtd's to be considered reasonable.
Taking a look back first, we see that the company grew revenue by an impressive 17% last year. Although, its longer-term performance hasn't been as strong with three-year revenue growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.
Looking ahead now, revenue is anticipated to climb by 63% during the coming year according to the one analyst following the company. With the industry only predicted to deliver 26%, the company is positioned for a stronger revenue result.
In light of this, it's peculiar that Shenzhen Sunnypol OptoelectronicsLtd's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.
What Does Shenzhen Sunnypol OptoelectronicsLtd's P/S Mean For Investors?
Having almost fallen off a cliff, Shenzhen Sunnypol OptoelectronicsLtd's share price has pulled its P/S way down as well. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
To us, it seems Shenzhen Sunnypol OptoelectronicsLtd currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.
Having said that, be aware Shenzhen Sunnypol OptoelectronicsLtd is showing 3 warning signs in our investment analysis, and 1 of those is concerning.
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.
About SZSE:002876
Shenzhen Sunnypol OptoelectronicsLtd
Shenzhen Sunnypol Optoelectronics Co.,Ltd.