BlueFocus Intelligent Communications Group Co., Ltd. (SZSE:300058) shares have retraced a considerable 31% in the last month, reversing a fair amount of their solid recent performance. Longer-term, the stock has been solid despite a difficult 30 days, gaining 21% in the last year.

After such a large drop in price, BlueFocus Intelligent Communications Group's price-to-sales (or "P/S") ratio of 0.3x might make it look like a strong buy right now compared to the wider Media industry in China, where around half of the companies have P/S ratios above 3.3x and even P/S above 6x 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 so limited.

What Does BlueFocus Intelligent Communications Group's P/S Mean For Shareholders?

Recent times have been advantageous for BlueFocus Intelligent Communications Group as its revenues have been rising faster than most other companies. It might be that many expect the strong revenue performance to degrade substantially, which has repressed the share price, and thus the P/S ratio. If the company manages to stay the course, then investors should be rewarded with a share price that matches its revenue figures.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

The only time you'd be truly comfortable seeing a P/S as depressed as BlueFocus Intelligent Communications Group's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered an exceptional 33% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 43% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Turning to the outlook, the next year should generate growth of 12% as estimated by the four analysts watching the company. With the industry predicted to deliver 12% growth , the company is positioned for a comparable revenue result.

With this information, we find it odd that BlueFocus Intelligent Communications Group is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

The Key Takeaway

Having almost fallen off a cliff, BlueFocus Intelligent Communications Group's share price has pulled its P/S way down as well. 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.

Our examination of BlueFocus Intelligent Communications Group's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. Despite average revenue growth estimates, there could be some unobserved threats keeping the P/S low. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

You always need to take note of risks, for example - BlueFocus Intelligent Communications Group has 1 warning sign we think you should be aware of.

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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