CICT Mobile Communication Technology Co., Ltd. (SHSE:688387) shareholders are no doubt pleased to see that the share price has bounced 27% in the last month, although it is still struggling to make up recently lost ground. Notwithstanding the latest gain, the annual share price return of 8.1% isn't as impressive.

Although its price has surged higher, CICT Mobile Communication Technology may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3x, since almost half of all companies in the Communications industry in China have P/S ratios greater than 4.5x and even P/S higher than 8x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

How CICT Mobile Communication Technology Has Been Performing

Recent times have been advantageous for CICT Mobile Communication Technology as its revenues have been rising faster 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.

How Is CICT Mobile Communication Technology's Revenue Growth Trending?

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

If we review the last year of revenue growth, the company posted a worthy increase of 14%. This was backed up an excellent period prior to see revenue up by 74% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenues over that time.

Looking ahead now, revenue is anticipated to climb by 31% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 51%, which is noticeably more attractive.

In light of this, it's understandable that CICT Mobile Communication Technology's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From CICT Mobile Communication Technology's P/S?

CICT Mobile Communication Technology's stock price has surged recently, but its but its P/S still remains modest. 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 CICT Mobile Communication Technology's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for CICT Mobile Communication Technology with six simple checks will allow you to discover any risks that could be an issue.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.