Talant Optronics (Suzhou) Co., Ltd. (SZSE:301045) shares have had a really impressive month, gaining 37% after a shaky period beforehand. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 11% in the last twelve months.

Even after such a large jump in price, there still wouldn't be many who think Talant Optronics (Suzhou)'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 4x. 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 Talant Optronics (Suzhou)'s Recent Performance Look Like?

With revenue growth that's superior to most other companies of late, Talant Optronics (Suzhou) has been doing relatively well. Perhaps the market is expecting this level of performance to taper off, keeping the P/S from soaring. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

How Is Talant Optronics (Suzhou)'s Revenue Growth Trending?

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

Retrospectively, the last year delivered an exceptional 20% gain to the company's top line. Still, revenue has fallen 23% in total from three years ago, which is quite disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the only analyst covering the company suggest revenue should grow by 27% over the next year. Meanwhile, the rest of the industry is forecast to expand by 27%, which is not materially different.

In light of this, it's understandable that Talant Optronics (Suzhou)'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.

The Key Takeaway

Its shares have lifted substantially and now Talant Optronics (Suzhou)'s P/S is back within range of the industry median. 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.

We've seen that Talant Optronics (Suzhou) maintains an adequate P/S seeing as its revenue growth figures match the rest of the industry. At this stage investors feel the potential for an improvement or deterioration in revenue isn't great enough to push P/S in a higher or lower direction. Unless these conditions change, they will continue to support the share price at these levels.

You should always think about risks. Case in point, we've spotted 2 warning signs for Talant Optronics (Suzhou) you should be aware of.

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.