Despite an already strong run, Sunshine Global Circuits Co.,Ltd. (SZSE:300739) shares have been powering on, with a gain of 38% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 26% in the last year.

Although its price has surged higher, there still wouldn't be many who think Sunshine Global CircuitsLtd's price-to-sales (or "P/S") ratio of 3.7x is worth a mention when the median P/S in China's Electronic industry is similar at about 4.3x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Sunshine Global CircuitsLtd Has Been Performing

For example, consider that Sunshine Global CircuitsLtd's financial performance has been poor lately as its revenue has been in decline. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Sunshine Global CircuitsLtd's Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Sunshine Global CircuitsLtd's is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered a frustrating 5.2% decrease to the company's top line. This means it has also seen a slide in revenue over the longer-term as revenue is down 3.1% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 27% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we find it worrying that Sunshine Global CircuitsLtd's P/S exceeds that of its industry peers. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/S falls to levels more in line with the recent negative growth rates.

What Does Sunshine Global CircuitsLtd's P/S Mean For Investors?

Sunshine Global CircuitsLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Our look at Sunshine Global CircuitsLtd revealed its shrinking revenues over the medium-term haven't impacted the P/S as much as we anticipated, given the industry is set to grow. When we see revenue heading backwards in the context of growing industry forecasts, it'd make sense to expect a possible share price decline on the horizon, sending the moderate P/S lower. If recent medium-term revenue trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware Sunshine Global CircuitsLtd is showing 6 warning signs in our investment analysis, and 2 of those are significant.

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).

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