The Shanghai HIUV New Materials Co.,Ltd (SHSE:688680) share price has fared very poorly over the last month, falling by a substantial 26%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 71% loss during that time.

Since its price has dipped substantially, Shanghai HIUV New MaterialsLtd's price-to-sales (or "P/S") ratio of 0.8x might make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 2.2x and even P/S above 5x are quite common. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Shanghai HIUV New MaterialsLtd's Recent Performance Look Like?

Shanghai HIUV New MaterialsLtd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

How Is Shanghai HIUV New MaterialsLtd's Revenue Growth Trending?

In order to justify its P/S ratio, Shanghai HIUV New MaterialsLtd would need to produce sluggish growth that's trailing the industry.

Retrospectively, the last year delivered a frustrating 8.2% decrease to the company's top line. Even so, admirably revenue has lifted 229% in aggregate from three years ago, notwithstanding the last 12 months. Accordingly, while they would have preferred to keep the run going, shareholders would definitely welcome the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 18% during the coming year according to the three analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 21%, which is noticeably more attractive.

With this in consideration, its clear as to why Shanghai HIUV New MaterialsLtd's P/S is falling short industry peers. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Key Takeaway

Shanghai HIUV New MaterialsLtd's P/S has taken a dip along with its share price. 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.

As expected, our analysis of Shanghai HIUV New MaterialsLtd's analyst forecasts confirms that the company's underwhelming revenue outlook is a major contributor to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 2 warning signs we've spotted with Shanghai HIUV New MaterialsLtd.

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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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.