Despite an already strong run, Bangyan Technology Co., Ltd. (SHSE:688132) shares have been powering on, with a gain of 34% in the last thirty days. But the gains over the last month weren't enough to make shareholders whole, as the share price is still down 8.9% in the last twelve months.

Although its price has surged higher, it's still not a stretch to say that Bangyan Technology's price-to-sales (or "P/S") ratio of 11.2x right now seems quite "middle-of-the-road" compared to the Aerospace & Defense industry in China, where the median P/S ratio is around 9.3x. 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 Bangyan Technology's Recent Performance Look Like?

With revenue that's retreating more than the industry's average of late, Bangyan Technology has been very sluggish. It might be that many expect the dismal revenue performance to revert back to industry averages soon, which has kept the P/S from falling. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

Do Revenue Forecasts Match The P/S Ratio?

In order to justify its P/S ratio, Bangyan Technology would need to produce growth that's similar to the industry.

Retrospectively, the last year delivered a frustrating 22% decrease to the company's top line. As a result, revenue from three years ago have also fallen 12% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the two analysts covering the company suggest revenue should grow by 140% over the next year. With the industry only predicted to deliver 57%, the company is positioned for a stronger revenue result.

With this in consideration, we find it intriguing that Bangyan Technology's P/S is closely matching its industry peers. Apparently some shareholders are skeptical of the forecasts and have been accepting lower selling prices.

What We Can Learn From Bangyan Technology's P/S?

Bangyan Technology's stock has a lot of momentum behind it lately, which has brought its P/S level with the rest of 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.

Looking at Bangyan Technology's analyst forecasts revealed that its superior revenue outlook isn't giving the boost to its P/S that we would've expected. Perhaps uncertainty in the revenue forecasts are what's keeping the P/S ratio consistent with the rest of the industry. This uncertainty seems to be reflected in the share price which, while stable, could be higher given the revenue forecasts.

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

If you're unsure about the strength of Bangyan Technology's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.