Xgimi Technology Co.,Ltd. (SHSE:688696) shareholders would be excited to see that the share price has had a great month, posting a 40% gain and recovering from prior weakness. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

Even after such a large jump in price, there still wouldn't be many who think Xgimi TechnologyLtd's price-to-sales (or "P/S") ratio of 1.5x is worth a mention when the median P/S in China's Consumer Durables industry is similar at about 1.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

How Has Xgimi TechnologyLtd Performed Recently?

Xgimi TechnologyLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. One possibility is that the P/S ratio is moderate because investors think this poor revenue performance will turn around. You'd really hope so, otherwise you're paying a relatively elevated price for a company with this sort of growth profile.

Do Revenue Forecasts Match The P/S Ratio?

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

Retrospectively, the last year delivered a frustrating 7.4% decrease to the company's top line. Unfortunately, that's brought it right back to where it started three years ago with revenue growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 10.0% during the coming year according to the six analysts following the company. With the industry predicted to deliver 9.2% growth , the company is positioned for a comparable revenue result.

In light of this, it's understandable that Xgimi TechnologyLtd's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

What Does Xgimi TechnologyLtd's P/S Mean For Investors?

Xgimi TechnologyLtd appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've seen that Xgimi TechnologyLtd maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. If all things remain constant, the possibility of a drastic share price movement remains fairly remote.

You should always think about risks. Case in point, we've spotted 3 warning signs for Xgimi TechnologyLtd you should be aware of, and 1 of them is a bit unpleasant.

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.