Investors Still Aren't Entirely Convinced By Comtec Solar Systems Group Limited's (HKG:712) Revenues Despite 38% Price Jump

Comtec Solar Systems Group Limited (HKG:712) shareholders are no doubt pleased to see that the share price has bounced 38% in the last month, although it is still struggling to make up recently lost ground. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 9.9% over the last year.

In spite of the firm bounce in price, when close to half the companies operating in Hong Kong's Semiconductor industry have price-to-sales ratios (or "P/S") above 1.3x, you may still consider Comtec Solar Systems Group as an enticing stock to check out with its 0.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

See our latest analysis for Comtec Solar Systems Group

What Does Comtec Solar Systems Group's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Comtec Solar Systems Group has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Although there are no analyst estimates available for Comtec Solar Systems Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Comtec Solar Systems Group's to be considered reasonable.

If we review the last year of revenue growth, we see the company's revenues grew exponentially. The amazing performance means it was also able to grow revenue by 181% 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.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 19% shows it's noticeably more attractive.

With this in mind, we find it intriguing that Comtec Solar Systems Group's P/S isn't as high compared to that of its industry peers. It looks like most investors are not convinced the company can maintain its recent growth rates.

What Does Comtec Solar Systems Group's P/S Mean For Investors?

Comtec Solar Systems Group's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

Our examination of Comtec Solar Systems Group revealed its three-year revenue trends aren't boosting its P/S anywhere near as much as we would have predicted, given they look better than current industry expectations. When we see robust revenue growth that outpaces the industry, we presume that there are notable underlying risks to the company's future performance, which is exerting downward pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

And what about other risks? Every company has them, and we've spotted 5 warning signs for Comtec Solar Systems Group (of which 2 can't be ignored!) you should know about.

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.