Sichuan Tianyi Comheart Telecom Co., Ltd.'s (SZSE:300504) Share Price Boosted 37% But Its Business Prospects Need A Lift Too

Simply Wall St · 10/14 22:26

Despite an already strong run, Sichuan Tianyi Comheart Telecom Co., Ltd. (SZSE:300504) shares have been powering on, with a gain of 37% in the last thirty days. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 15% over that time.

Although its price has surged higher, Sichuan Tianyi Comheart Telecom may still look like a strong buying opportunity at present with its price-to-sales (or "P/S") ratio of 2x, considering almost half of all companies in the Communications industry in China have P/S ratios greater than 4.4x and even P/S higher than 8x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

View our latest analysis for Sichuan Tianyi Comheart Telecom

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SZSE:300504 Price to Sales Ratio vs Industry October 14th 2024

How Sichuan Tianyi Comheart Telecom Has Been Performing

Sichuan Tianyi Comheart Telecom hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Keen to find out how analysts think Sichuan Tianyi Comheart Telecom's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Sichuan Tianyi Comheart Telecom's Revenue Growth Trending?

In order to justify its P/S ratio, Sichuan Tianyi Comheart Telecom would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered a frustrating 21% decrease to the company's top line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 6.0% overall rise in revenue. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been mostly respectable for the company.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the sole analyst following the company. With the industry predicted to deliver 43% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Sichuan Tianyi Comheart Telecom is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What Does Sichuan Tianyi Comheart Telecom's P/S Mean For Investors?

Shares in Sichuan Tianyi Comheart Telecom have risen appreciably however, its P/S is still subdued. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As expected, our analysis of Sichuan Tianyi Comheart Telecom's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Before you settle on your opinion, we've discovered 3 warning signs for Sichuan Tianyi Comheart Telecom (1 is significant!) that you should be aware of.

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