Guangzhou Anyka Microelectronics Co., Ltd. (SHSE:688620) shareholders have had their patience rewarded with a 32% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 24% over that time.

Even after such a large jump in price, it's still not a stretch to say that Guangzhou Anyka Microelectronics' price-to-sales (or "P/S") ratio of 6.4x right now seems quite "middle-of-the-road" compared to the Semiconductor industry in China, where the median P/S ratio is around 7.1x. 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.

What Does Guangzhou Anyka Microelectronics' Recent Performance Look Like?

Guangzhou Anyka Microelectronics could be doing better as it's been growing revenue less than most other companies lately. Perhaps the market is expecting future revenue performance to lift, which has kept the P/S from declining. However, if this isn't the case, investors might get caught out paying too much for the stock.

Is There Some Revenue Growth Forecasted For Guangzhou Anyka Microelectronics?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Guangzhou Anyka Microelectronics' to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.3% last year. The latest three year period has also seen a 12% overall rise in revenue, aided somewhat by its short-term performance. So we can start by confirming that the company has actually done a good job of growing revenue over that time.

Shifting to the future, estimates from the sole analyst covering the company suggest revenue should grow by 31% over the next year. That's shaping up to be materially lower than the 37% growth forecast for the broader industry.

With this in mind, we find it intriguing that Guangzhou Anyka Microelectronics' P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. These shareholders may be setting themselves up for future disappointment if the P/S falls to levels more in line with the growth outlook.

What We Can Learn From Guangzhou Anyka Microelectronics' P/S?

Guangzhou Anyka Microelectronics appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

When you consider that Guangzhou Anyka Microelectronics' revenue growth estimates are fairly muted compared to the broader industry, it's easy to see why we consider it unexpected to be trading at its current P/S ratio. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

A lot of potential risks can sit within a company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for Guangzhou Anyka Microelectronics with six simple checks.

If these risks are making you reconsider your opinion on Guangzhou Anyka Microelectronics, 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.