T&S Communications Co.,Ltd.'s (SZSE:300570) 27% Cheaper Price Remains In Tune With Revenues

T&S Communications Co.,Ltd. (SZSE:300570) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Looking at the bigger picture, even after this poor month the stock is up 98% in the last year.

In spite of the heavy fall in price, T&S CommunicationsLtd may still be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 16.3x, when you consider almost half of the companies in the Communications industry in China have P/S ratios under 6x and even P/S lower than 3x aren't out of the ordinary. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for T&S CommunicationsLtd

What Does T&S CommunicationsLtd's P/S Mean For Shareholders?

T&S CommunicationsLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. It seems the market expects this form will continue into the future, hence the elevated P/S ratio. If not, then existing shareholders might 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 T&S CommunicationsLtd.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as steep as T&S CommunicationsLtd's is when the company's growth is on track to outshine the industry decidedly.

If we review the last year of revenue growth, the company posted a terrific increase of 38%. The strong recent performance means it was also able to grow revenue by 76% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 76% during the coming year according to the four analysts following the company. With the industry only predicted to deliver 31%, the company is positioned for a stronger revenue result.

With this information, we can see why T&S CommunicationsLtd is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What We Can Learn From T&S CommunicationsLtd's P/S?

A significant share price dive has done very little to deflate T&S CommunicationsLtd's very lofty P/S. 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.

We've established that T&S CommunicationsLtd maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Communications industry, as expected. At this stage investors feel the potential for a deterioration in revenues is quite remote, justifying the elevated P/S ratio. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Plus, you should also learn about these 2 warning signs we've spotted with T&S CommunicationsLtd (including 1 which is a bit concerning).

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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.