Tianjin Jingwei Huikai Optoelectronic Co., Ltd.'s (SZSE:300120) Shares Bounce 59% But Its Business Still Trails The Industry

Tianjin Jingwei Huikai Optoelectronic Co., Ltd. (SZSE:300120) shareholders would be excited to see that the share price has had a great month, posting a 59% gain and recovering from prior weakness. Unfortunately, despite the strong performance over the last month, the full year gain of 7.2% isn't as attractive.

Even after such a large jump in price, Tianjin Jingwei Huikai Optoelectronic may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.3x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 4x 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 Tianjin Jingwei Huikai Optoelectronic

What Does Tianjin Jingwei Huikai Optoelectronic's Recent Performance Look Like?

Tianjin Jingwei Huikai Optoelectronic has been doing a good job lately as it's been growing revenue at a solid pace. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. Those who are bullish on Tianjin Jingwei Huikai Optoelectronic will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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.

Retrospectively, the last year delivered a decent 13% gain to the company's revenues. However, due to its less than impressive performance prior to this period, revenue growth is practically non-existent over the last three years overall. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

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.

With this in consideration, it's easy to understand why Tianjin Jingwei Huikai Optoelectronic's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Key Takeaway

Tianjin Jingwei Huikai Optoelectronic's recent share price jump still sees fails to bring its P/S alongside the industry median. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

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. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Tianjin Jingwei Huikai Optoelectronic that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.