Market Might Still Lack Some Conviction On Shenzhen Division Co.,Ltd. (SZSE:300167) Even After 25% Share Price Boost

Despite an already strong run, Shenzhen Division Co.,Ltd. (SZSE:300167) shares have been powering on, with a gain of 25% in the last thirty days. Looking further back, the 22% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Although its price has surged higher, Shenzhen DivisionLtd's price-to-sales (or "P/S") ratio of 1.4x might still make it look like a strong buy right now compared to the wider Communications industry in China, where around half of the companies have P/S ratios above 4.8x and even P/S above 9x 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.

See our latest analysis for Shenzhen DivisionLtd

What Does Shenzhen DivisionLtd's Recent Performance Look Like?

Recent times have been quite advantageous for Shenzhen DivisionLtd as its revenue has been rising very briskly. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the P/S ratio. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

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

Is There Any Revenue Growth Forecasted For Shenzhen DivisionLtd?

In order to justify its P/S ratio, Shenzhen DivisionLtd would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 61% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 138% 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.

Weighing that recent medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 36% shows it's about the same on an annualised basis.

With this in consideration, we find it intriguing that Shenzhen DivisionLtd's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

The Bottom Line On Shenzhen DivisionLtd's P/S

Even after such a strong price move, Shenzhen DivisionLtd's P/S still trails the rest of 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 Shenzhen DivisionLtd revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, There could be some unobserved threats to revenue preventing the P/S ratio from matching the company's performance. While recent

It is also worth noting that we have found 2 warning signs for Shenzhen DivisionLtd that you need to take into consideration.

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.