Tianjin Jingwei Huikai Optoelectronic Co., Ltd. (SZSE:300120) Looks Inexpensive After Falling 30% But Perhaps Not Attractive Enough

The Tianjin Jingwei Huikai Optoelectronic Co., Ltd. (SZSE:300120) share price has softened a substantial 30% over the previous 30 days, handing back much of the gains the stock has made lately. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 22%.

Since its price has dipped substantially, Tianjin Jingwei Huikai Optoelectronic's price-to-sales (or "P/S") ratio of 1.4x might make it look like a strong buy right now compared to the wider Electronic industry in China, where around half of the companies have P/S ratios above 4x and even P/S above 8x are quite common. 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.

Check out our latest analysis for Tianjin Jingwei Huikai Optoelectronic

How Has Tianjin Jingwei Huikai Optoelectronic Performed Recently?

The revenue growth achieved at Tianjin Jingwei Huikai Optoelectronic over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If that doesn't eventuate, then existing shareholders have reason to be optimistic about the future direction of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Tianjin Jingwei Huikai Optoelectronic will help you shine a light on its historical performance.

Is There Any Revenue Growth Forecasted For Tianjin Jingwei Huikai Optoelectronic?

Tianjin Jingwei Huikai Optoelectronic's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 14% last year. The solid recent performance means it was also able to grow revenue by 8.2% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

This is in contrast to the rest of the industry, which is expected to grow by 26% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Tianjin Jingwei Huikai Optoelectronic's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Final Word

Shares in Tianjin Jingwei Huikai Optoelectronic have plummeted and its P/S has followed suit. 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.

In line with expectations, Tianjin Jingwei Huikai Optoelectronic maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

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

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.