Shenzhen Techwinsemi Technology Co., Ltd. (SZSE:001309) Stock Catapults 34% Though Its Price And Business Still Lag The Industry

Simply Wall St · 10/18 23:14

Those holding Shenzhen Techwinsemi Technology Co., Ltd. (SZSE:001309) shares would be relieved that the share price has rebounded 34% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. The last 30 days bring the annual gain to a very sharp 28%.

Even after such a large jump in price, Shenzhen Techwinsemi Technology may still be sending buy signals at present with its price-to-sales (or "P/S") ratio of 3.7x, considering almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 6.2x and even P/S higher than 12x aren't out of the ordinary. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

See our latest analysis for Shenzhen Techwinsemi Technology

ps-multiple-vs-industry
SZSE:001309 Price to Sales Ratio vs Industry October 18th 2024

What Does Shenzhen Techwinsemi Technology's P/S Mean For Shareholders?

Shenzhen Techwinsemi 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 degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

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

How Is Shenzhen Techwinsemi Technology's Revenue Growth Trending?

Shenzhen Techwinsemi Technology's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 170% last year. Pleasingly, revenue has also lifted 238% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 13% during the coming year according to the dual analysts following the company. That's shaping up to be materially lower than the 37% growth forecast for the broader industry.

In light of this, it's understandable that Shenzhen Techwinsemi Technology's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

Shenzhen Techwinsemi Technology's stock price has surged recently, but its but its P/S still remains modest. 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.

As we suspected, our examination of Shenzhen Techwinsemi Technology's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Techwinsemi Technology, and understanding these should be part of your investment process.

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).