Despite an already strong run, RAISECOM TECHNOLOGY CO.,Ltd. (SHSE:603803) shares have been powering on, with a gain of 83% in the last thirty days. The last 30 days bring the annual gain to a very sharp 67%.

In spite of the firm bounce in price, RAISECOM TECHNOLOGYLtd may still be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 3.8x, since almost half of all companies in the Communications industry in China have P/S ratios greater than 5.8x and even P/S higher than 10x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does RAISECOM TECHNOLOGYLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at RAISECOM TECHNOLOGYLtd over the last year, which is not ideal at all. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For RAISECOM TECHNOLOGYLtd?

RAISECOM TECHNOLOGYLtd's P/S ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the industry.

Taking a look back first, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 17%. As a result, revenue from three years ago have also fallen 19% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Comparing that to the industry, which is predicted to deliver 36% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

With this information, we are not surprised that RAISECOM TECHNOLOGYLtd is trading at a P/S lower than the industry. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What We Can Learn From RAISECOM TECHNOLOGYLtd's P/S?

Despite RAISECOM TECHNOLOGYLtd's share price climbing recently, its P/S still lags most other companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

Our examination of RAISECOM TECHNOLOGYLtd confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for RAISECOM TECHNOLOGYLtd (1 is significant) you should be aware of.

If you're unsure about the strength of RAISECOM TECHNOLOGYLtd'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.