With a price-to-sales (or "P/S") ratio of 0.4x Wuxi Taiji Industry Limited Corporation (SHSE:600667) may be sending very bullish signals at the moment, given that almost half of all the Semiconductor companies in China have P/S ratios greater than 7.5x and even P/S higher than 14x are not unusual. 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.

Check out our latest analysis for Wuxi Taiji Industry Limited

What Does Wuxi Taiji Industry Limited's Recent Performance Look Like?

Wuxi Taiji Industry Limited's revenue growth of late has been pretty similar to most other companies. It might be that many expect the mediocre revenue performance to degrade, which has repressed the P/S ratio. Those who are bullish on Wuxi Taiji Industry Limited will be hoping that this isn't the case.

How Is Wuxi Taiji Industry Limited's Revenue Growth Trending?

In order to justify its P/S ratio, Wuxi Taiji Industry Limited would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. Pleasingly, revenue has also lifted 123% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 25% during the coming year according to the sole analyst following the company. With the industry predicted to deliver 40% growth, the company is positioned for a weaker revenue result.

With this information, we can see why Wuxi Taiji Industry Limited is trading at a P/S lower than the industry. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does Wuxi Taiji Industry Limited's P/S Mean For Investors?

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.

As expected, our analysis of Wuxi Taiji Industry Limited's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor 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. The company will need a change of fortune to justify the P/S rising higher in the future.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Wuxi Taiji Industry Limited with six simple checks on some of these key factors.

If you're unsure about the strength of Wuxi Taiji Industry Limited'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.