Xgimi Technology Co.,Ltd. (SHSE:688696) Stocks Shoot Up 29% But Its P/S Still Looks Reasonable

Simply Wall St · 09/28 00:26

Those holding Xgimi Technology Co.,Ltd. (SHSE:688696) shares would be relieved that the share price has rebounded 29% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 46% over that time.

In spite of the firm bounce in price, there still wouldn't be many who think Xgimi TechnologyLtd's price-to-sales (or "P/S") ratio of 1.3x is worth a mention when the median P/S in China's Consumer Durables industry is similar at about 1.7x. 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 Xgimi TechnologyLtd

ps-multiple-vs-industry
SHSE:688696 Price to Sales Ratio vs Industry September 28th 2024

What Does Xgimi TechnologyLtd's P/S Mean For Shareholders?

While the industry has experienced revenue growth lately, Xgimi TechnologyLtd's revenue has gone into reverse gear, which is not great. It might be that many expect the dour revenue performance to strengthen positively, which has kept the P/S from falling. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

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

Is There Some Revenue Growth Forecasted For Xgimi TechnologyLtd?

In order to justify its P/S ratio, Xgimi TechnologyLtd would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 7.4%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Turning to the outlook, the next year should generate growth of 10.0% as estimated by the six analysts watching the company. That's shaping up to be similar to the 9.2% growth forecast for the broader industry.

With this information, we can see why Xgimi TechnologyLtd is trading at a fairly similar P/S to the industry. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Final Word

Xgimi TechnologyLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our look at Xgimi TechnologyLtd'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. Unless these conditions change, they will continue to support the share price at these levels.

Before you settle on your opinion, we've discovered 2 warning signs for Xgimi TechnologyLtd that you should be aware of.

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).