J.Pond Precision Technology Co., Ltd.'s (SZSE:301326) P/S Is Still On The Mark Following 28% Share Price Bounce

J.Pond Precision Technology Co., Ltd. (SZSE:301326) shares have had a really impressive month, gaining 28% after a shaky period beforehand. This latest share price bounce rounds out a remarkable 344% gain over the last twelve months.

After such a large jump in price, J.Pond Precision Technology may be sending strong sell signals at present with a price-to-sales (or "P/S") ratio of 8.1x, when you consider almost half of the companies in the Electronic industry in China have P/S ratios under 4.4x and even P/S lower than 2x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/S.

See our latest analysis for J.Pond Precision Technology

How Has J.Pond Precision Technology Performed Recently?

With revenue growth that's inferior to most other companies of late, J.Pond Precision Technology has been relatively sluggish. It might be that many expect the uninspiring revenue performance to recover significantly, which has kept the P/S ratio from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

Want the full picture on analyst estimates for the company? Then our free report on J.Pond Precision Technology will help you uncover what's on the horizon.

Do Revenue Forecasts Match The High P/S Ratio?

There's an inherent assumption that a company should far outperform the industry for P/S ratios like J.Pond Precision Technology's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. Whilst it's an improvement, it wasn't enough to get the company out of the hole it was in, with revenue down 25% overall from three years ago. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the one analyst covering the company suggest revenue should grow by 76% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 26%, which is noticeably less attractive.

In light of this, it's understandable that J.Pond Precision Technology's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does J.Pond Precision Technology's P/S Mean For Investors?

J.Pond Precision Technology's P/S has grown nicely over the last month thanks to a handy boost in the share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that J.Pond Precision Technology maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Electronic industry, as expected. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

It is also worth noting that we have found 1 warning sign for J.Pond Precision Technology 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.