When you see that almost half of the companies in the Food industry in China have price-to-sales ratios (or "P/S") above 1.4x, TECON BIOLOGY Co.LTD (SZSE:002100) looks to be giving off some buy signals with its 0.5x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does TECON BIOLOGYLTD's P/S Mean For Shareholders?

TECON BIOLOGYLTD's revenue growth of late has been pretty similar to most other companies. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. Those who are bullish on TECON BIOLOGYLTD will be hoping that this isn't the case.

How Is TECON BIOLOGYLTD's Revenue Growth Trending?

The only time you'd be truly comfortable seeing a P/S as low as TECON BIOLOGYLTD's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. Regardless, revenue has managed to lift by a handy 19% in aggregate from three years ago, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

Shifting to the future, estimates from the eight analysts covering the company suggest revenue should grow by 20% over the next year. Meanwhile, the rest of the industry is forecast to only expand by 16%, which is noticeably less attractive.

With this information, we find it odd that TECON BIOLOGYLTD is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From TECON BIOLOGYLTD's P/S?

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.

A look at TECON BIOLOGYLTD's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. When we see strong growth forecasts like this, we can only assume potential risks are what might be placing significant pressure on the P/S ratio. 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.

Many other vital risk factors can be found on the company's balance sheet. You can assess many of the main risks through our free balance sheet analysis for TECON BIOLOGYLTD with six simple checks.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.