Vanjee Technology Co., Ltd.'s (SZSE:300552) Popularity With Investors Under Threat As Stock Sinks 32%

Vanjee Technology Co., Ltd. (SZSE:300552) shares have had a horrible month, losing 32% after a relatively good period beforehand. The recent drop has obliterated the annual return, with the share price now down 8.5% over that longer period.

In spite of the heavy fall in price, you could still be forgiven for thinking Vanjee Technology is a stock not worth researching with a price-to-sales ratios (or "P/S") of 4.8x, considering almost half the companies in China's Electronic industry have P/S ratios below 3.4x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

Check out our latest analysis for Vanjee Technology

How Vanjee Technology Has Been Performing

Vanjee Technology's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. If not, then existing shareholders may be a little nervous about the viability of the share price.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Vanjee Technology.

How Is Vanjee Technology's Revenue Growth Trending?

Vanjee Technology's P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 4.2% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 45% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 19% as estimated by the one analyst watching the company. With the industry predicted to deliver 23% growth, the company is positioned for a weaker revenue result.

With this in consideration, we believe it doesn't make sense that Vanjee Technology's P/S is outpacing its industry peers. It seems most investors are hoping for a turnaround in the company's business prospects, but the analyst cohort is not so confident this will happen. Only the boldest would assume these prices are sustainable as this level of revenue growth is likely to weigh heavily on the share price eventually.

What We Can Learn From Vanjee Technology's P/S?

Vanjee Technology's P/S remain high even after its stock plunged. 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.

Despite analysts forecasting some poorer-than-industry revenue growth figures for Vanjee Technology, this doesn't appear to be impacting the P/S in the slightest. Right now we aren't comfortable with the high P/S as the predicted future revenues aren't likely to support such positive sentiment for long. At these price levels, investors should remain cautious, particularly if things don't improve.

It is also worth noting that we have found 1 warning sign for Vanjee Technology that you need to take into consideration.

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.