You may think that with a price-to-sales (or "P/S") ratio of 1.1x Guangdong Kingshine Electronic Technology Co.,Ltd. (SZSE:300903) is definitely a stock worth checking out, seeing as almost half of all the Electronic companies in China have P/S ratios greater than 3.7x and even P/S above 7x aren't out of the ordinary. 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 Guangdong Kingshine Electronic TechnologyLtd

How Has Guangdong Kingshine Electronic TechnologyLtd Performed Recently?

The revenue growth achieved at Guangdong Kingshine Electronic TechnologyLtd over the last year would be more than acceptable for most companies. It might be that many expect the respectable revenue performance to degrade substantially, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

How Is Guangdong Kingshine Electronic TechnologyLtd's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as depressed as Guangdong Kingshine Electronic TechnologyLtd'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 managed to grow revenues by a handy 14% last year. This was backed up an excellent period prior to see revenue up by 93% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that to the industry, which is predicted to deliver 58% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Guangdong Kingshine Electronic TechnologyLtd's P/S falls short of the mark set by its industry peers. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

The Final Word

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.

In line with expectations, Guangdong Kingshine Electronic TechnologyLtd maintains its low P/S on the weakness of its recent three-year growth being lower than the wider industry forecast. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Guangdong Kingshine Electronic TechnologyLtd that you should be aware of.

If these risks are making you reconsider your opinion on Guangdong Kingshine Electronic TechnologyLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.