XiaMen HongXin Electron-tech Group Co.,Ltd (SZSE:300657) shares have continued their recent momentum with a 27% gain in the last month alone. Notwithstanding the latest gain, the annual share price return of 2.9% isn't as impressive.

Even after such a large jump in price, XiaMen HongXin Electron-tech GroupLtd may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.9x, since almost half of all companies in the Electronic industry in China have P/S ratios greater than 4.5x and even P/S higher than 9x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How Has XiaMen HongXin Electron-tech GroupLtd Performed Recently?

XiaMen HongXin Electron-tech GroupLtd certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

How Is XiaMen HongXin Electron-tech GroupLtd's Revenue Growth Trending?

XiaMen HongXin Electron-tech GroupLtd's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

Taking a look back first, we see that the company grew revenue by an impressive 78% last year. The latest three year period has also seen an excellent 80% overall rise in revenue, aided by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 57% as estimated by the one analyst watching the company. With the industry only predicted to deliver 27%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that XiaMen HongXin Electron-tech GroupLtd's P/S sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

XiaMen HongXin Electron-tech GroupLtd's recent share price jump still sees fails to bring its P/S alongside the industry median. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at XiaMen HongXin Electron-tech GroupLtd's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

Before you take the next step, you should know about the 1 warning sign for XiaMen HongXin Electron-tech GroupLtd that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.