Tianjin Printronics Circuit Corporation (SZSE:002134) shares have continued their recent momentum with a 28% gain in the last month alone. The last month tops off a massive increase of 105% in the last year.

Even after such a large jump in price, there still wouldn't be many who think Tianjin Printronics Circuit's price-to-sales (or "P/S") ratio of 5x is worth a mention when the median P/S in China's Electronic industry is similar at about 4.5x. 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 Tianjin Printronics Circuit's P/S Mean For Shareholders?

With revenue growth that's exceedingly strong of late, Tianjin Printronics Circuit has been doing very well. Perhaps the market is expecting future revenue performance to taper off, which has kept the P/S from rising. Those who are bullish on Tianjin Printronics Circuit will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

What Are Revenue Growth Metrics Telling Us About The P/S?

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

Retrospectively, the last year delivered an exceptional 76% gain to the company's top line. Pleasingly, revenue has also lifted 64% in aggregate from three years ago, thanks to the last 12 months of growth. So we can start by confirming that the company has done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 27% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Tianjin Printronics Circuit's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

What Does Tianjin Printronics Circuit's P/S Mean For Investors?

Tianjin Printronics Circuit appears to be back in favour with a solid price jump bringing its P/S back in line with other companies in the industry 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.

Our examination of Tianjin Printronics Circuit revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Before you settle on your opinion, we've discovered 3 warning signs for Tianjin Printronics Circuit (2 make us uncomfortable!) that you should be aware of.

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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