Unfortunately for some shareholders, the MEMSensing Microsystems (Suzhou, China) Co., Ltd. (SHSE:688286) share price has dived 30% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 49% in that time.

Although its price has dipped substantially, given close to half the companies operating in China's Electronic industry have price-to-sales ratios (or "P/S") below 3.5x, you may still consider MEMSensing Microsystems (Suzhou China) as a stock to potentially avoid with its 4.5x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's as high as it is.

What Does MEMSensing Microsystems (Suzhou China)'s P/S Mean For Shareholders?

Recent times have been advantageous for MEMSensing Microsystems (Suzhou China) as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on MEMSensing Microsystems (Suzhou China).

Is There Enough Revenue Growth Forecasted For MEMSensing Microsystems (Suzhou China)?

MEMSensing Microsystems (Suzhou China)'s P/S ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the industry.

Retrospectively, the last year delivered an exceptional 27% gain to the company's top line. Revenue has also lifted 13% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of revenue growth.

Turning to the outlook, the next year should generate growth of 41% as estimated by the three analysts watching the company. Meanwhile, the rest of the industry is forecast to only expand by 23%, which is noticeably less attractive.

With this in mind, it's not hard to understand why MEMSensing Microsystems (Suzhou China)'s P/S is high relative to its industry peers. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

What Does MEMSensing Microsystems (Suzhou China)'s P/S Mean For Investors?

There's still some elevation in MEMSensing Microsystems (Suzhou China)'s P/S, even if the same can't be said for its share price recently. 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 look into MEMSensing Microsystems (Suzhou China) shows that its P/S ratio remains high on the merit of its strong future revenues. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Before you take the next step, you should know about the 2 warning signs for MEMSensing Microsystems (Suzhou China) that we have uncovered.

If you're unsure about the strength of MEMSensing Microsystems (Suzhou China)'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.