You may think that with a price-to-sales (or "P/S") ratio of 2x Shenzhen Mason Technologies Co.,Ltd (SZSE:002654) is definitely a stock worth checking out, seeing as almost half of all the Electronic companies in China have P/S ratios greater than 4.3x and even P/S above 8x aren't out of the ordinary. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/S.

See our latest analysis for Shenzhen Mason TechnologiesLtd

How Shenzhen Mason TechnologiesLtd Has Been Performing

With revenue growth that's exceedingly strong of late, Shenzhen Mason TechnologiesLtd has been doing very well. Perhaps the market is expecting future revenue performance to dwindle, which has kept the P/S suppressed. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Revenue Growth Forecasted For Shenzhen Mason TechnologiesLtd?

The only time you'd be truly comfortable seeing a P/S as depressed as Shenzhen Mason TechnologiesLtd's is when the company's growth is on track to lag the industry decidedly.

Taking a look back first, we see that the company grew revenue by an impressive 44% last year. Revenue has also lifted 19% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

This is in contrast to the rest of the industry, which is expected to grow by 62% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Shenzhen Mason TechnologiesLtd's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Shenzhen Mason TechnologiesLtd's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Shenzhen Mason TechnologiesLtd revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Having said that, be aware Shenzhen Mason TechnologiesLtd is showing 1 warning sign in our investment analysis, you should know about.

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.