Topoint Technology Co., Ltd.'s (TWSE:8021) 27% Jump Shows Its Popularity With Investors

Topoint Technology Co., Ltd. (TWSE:8021) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 31%.

Although its price has surged higher, there still wouldn't be many who think Topoint Technology's price-to-sales (or "P/S") ratio of 1.7x is worth a mention when it essentially matches the median P/S in Taiwan's Electronic industry. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

See our latest analysis for Topoint Technology

How Has Topoint Technology Performed Recently?

Topoint Technology certainly has been doing a good job lately as it's been growing revenue more than most other companies. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

Is There Some Revenue Growth Forecasted For Topoint Technology?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Topoint Technology's to be considered reasonable.

Retrospectively, the last year delivered a decent 7.4% gain to the company's revenues. Still, lamentably revenue has fallen 6.2% in aggregate from three years ago, which is disappointing. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 21% over the next year. Meanwhile, the rest of the industry is forecast to expand by 20%, which is not materially different.

In light of this, it's understandable that Topoint Technology's P/S sits in line with the majority of other companies. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Topoint Technology's P/S

Topoint Technology's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of the industry. 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 look at Topoint Technology's revenue growth estimates show that its P/S is about what we expect, as both metrics follow closely with the industry averages. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 3 warning signs for Topoint Technology you should be aware of, and 1 of them doesn't sit too well with us.

If you're unsure about the strength of Topoint Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.