JinXianDai Information Industry Co.,Ltd. (SZSE:300830) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 34% share price drop.
Even after such a large drop in price, you could still be forgiven for feeling indifferent about JinXianDai Information IndustryLtd's P/S ratio of 4.6x, since the median price-to-sales (or "P/S") ratio for the Software industry in China is also close to 5x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.
See our latest analysis for JinXianDai Information IndustryLtd
SZSE:300830 Price to Sales Ratio vs Industry January 31st 2024
What Does JinXianDai Information IndustryLtd's P/S Mean For Shareholders?
As an illustration, revenue has deteriorated at JinXianDai Information IndustryLtd over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.
Although there are no analyst estimates available for JinXianDai Information IndustryLtd, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Do Revenue Forecasts Match The P/S Ratio?
The only time you'd be comfortable seeing a P/S like JinXianDai Information IndustryLtd's is when the company's growth is tracking the industry closely.
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 8.0%. Regardless, revenue has managed to lift by a handy 12% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of revenue growth.
This is in contrast to the rest of the industry, which is expected to grow by 35% over the next year, materially higher than the company's recent medium-term annualised growth rates.
In light of this, it's curious that JinXianDai Information IndustryLtd's P/S sits in line with the majority of other companies. 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.
The Final Word
JinXianDai Information IndustryLtd's plummeting stock price has brought its P/S back to a similar region as the rest of 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 JinXianDai Information IndustryLtd 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.
It is also worth noting that we have found 3 warning signs for JinXianDai Information IndustryLtd (2 shouldn't be ignored!) that you need to take into consideration.
It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
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我们对JinxianDai Information IndustryLtd的审查显示,其糟糕的三年收入趋势并未导致市销率低于我们的预期,因为这些趋势看起来比当前的行业前景差。当我们看到收入疲软,增长慢于行业增长时,我们怀疑股价有下跌的风险,这使市销售率恢复了预期。除非公司的中期业绩有显著改善,否则很难防止市销率下降到更合理的水平。