BIWIN Storage Technology Co., Ltd. (SHSE:688525) shareholders won't be pleased to see that the share price has had a very rough month, dropping 28% and undoing the prior period's positive performance. For any long-term shareholders, the last month ends a year to forget by locking in a 53% share price decline.

After such a large drop in price, BIWIN Storage Technology may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 4.5x, since almost half of all companies in the Semiconductor industry in China have P/S ratios greater than 5.9x 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.

How BIWIN Storage Technology Has Been Performing

With revenue growth that's superior to most other companies of late, BIWIN Storage Technology has been doing relatively well. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. 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.

Keen to find out how analysts think BIWIN Storage Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Do Revenue Forecasts Match The Low P/S Ratio?

There's an inherent assumption that a company should underperform the industry for P/S ratios like BIWIN Storage Technology's to be considered reasonable.

Retrospectively, the last year delivered an exceptional 21% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 120% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 73% during the coming year according to the one analyst following the company. That's shaping up to be materially higher than the 34% growth forecast for the broader industry.

In light of this, it's peculiar that BIWIN Storage Technology's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

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

The southerly movements of BIWIN Storage Technology's shares means its P/S is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

To us, it seems BIWIN Storage Technology currently trades on a significantly depressed P/S given its forecasted revenue growth is higher than the rest of its industry. 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.

You always need to take note of risks, for example - BIWIN Storage Technology has 3 warning signs we think 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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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.