Puya Semiconductor (Shanghai) Co., Ltd. (SHSE:688766) shares have had a really impressive month, gaining 60% after a shaky period beforehand. The last 30 days bring the annual gain to a very sharp 36%.

In spite of the firm bounce in price, it's still not a stretch to say that Puya Semiconductor (Shanghai)'s price-to-sales (or "P/S") ratio of 6.7x right now seems quite "middle-of-the-road" compared to the Semiconductor industry in China, where the median P/S ratio is around 6.2x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

What Does Puya Semiconductor (Shanghai)'s Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Puya Semiconductor (Shanghai) has been doing relatively well. It might be that many expect the strong revenue performance to wane, which has kept the P/S ratio from rising. 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 not quite in favour.

How Is Puya Semiconductor (Shanghai)'s Revenue Growth Trending?

The only time you'd be comfortable seeing a P/S like Puya Semiconductor (Shanghai)'s is when the company's growth is tracking the industry closely.

Retrospectively, the last year delivered an exceptional 89% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 63% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Looking ahead now, revenue is anticipated to climb by 38% during the coming year according to the four analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 36%, which is not materially different.

With this information, we can see why Puya Semiconductor (Shanghai) is trading at a fairly similar P/S to the industry. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

Puya Semiconductor (Shanghai)'s stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

A Puya Semiconductor (Shanghai)'s P/S seems about right to us given the knowledge that analysts are forecasting a revenue outlook that is similar to the Semiconductor 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.

Plus, you should also learn about these 2 warning signs we've spotted with Puya Semiconductor (Shanghai).

If these risks are making you reconsider your opinion on Puya Semiconductor (Shanghai), 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.