Guizhou Transportation Planning Survey&Design Academe Co.,Ltd. (SHSE:603458) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. For any long-term shareholders, the last month ends a year to forget by locking in a 52% share price decline.

Since its price has dipped substantially, Guizhou Transportation Planning Survey&Design AcademeLtd's price-to-sales (or "P/S") ratio of 0.7x might make it look like a buy right now compared to the Professional Services industry in China, where around half of the companies have P/S ratios above 2.6x and even P/S above 8x are quite common. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does Guizhou Transportation Planning Survey&Design AcademeLtd's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Guizhou Transportation Planning Survey&Design AcademeLtd 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. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

How Is Guizhou Transportation Planning Survey&Design AcademeLtd's Revenue Growth Trending?

Guizhou Transportation Planning Survey&Design AcademeLtd'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.

Retrospectively, the last year delivered a frustrating 8.2% decrease to the company's top line. As a result, revenue from three years ago have also fallen 37% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

In contrast to the company, the rest of the industry is expected to grow by 46% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

In light of this, it's understandable that Guizhou Transportation Planning Survey&Design AcademeLtd's P/S would sit below the majority of other companies. 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. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

The Bottom Line On Guizhou Transportation Planning Survey&Design AcademeLtd's P/S

The southerly movements of Guizhou Transportation Planning Survey&Design AcademeLtd's shares means its P/S is now sitting at a pretty low level. We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

It's no surprise that Guizhou Transportation Planning Survey&Design AcademeLtd maintains its low P/S off the back of its sliding revenue over the medium-term. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Guizhou Transportation Planning Survey&Design AcademeLtd (of which 1 shouldn't be ignored!) you should know about.

If these risks are making you reconsider your opinion on Guizhou Transportation Planning Survey&Design AcademeLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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