B-SOFT Co.,Ltd. (SZSE:300451) shareholders that were waiting for something to happen have been dealt a blow with a 27% 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 30% share price drop.

Since its price has dipped substantially, given about half the companies operating in China's Healthcare Services industry have price-to-sales ratios (or "P/S") above 6.3x, you may consider B-SOFTLtd as an attractive investment with its 3.9x P/S ratio. 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 B-SOFTLtd's P/S Mean For Shareholders?

B-SOFTLtd certainly has been doing a good job lately as it's been growing revenue more 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 you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

How Is B-SOFTLtd's Revenue Growth Trending?

In order to justify its P/S ratio, B-SOFTLtd would need to produce sluggish growth that's trailing the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 5.3%. Still, lamentably revenue has fallen 5.6% in aggregate from three years ago, which is disappointing. Therefore, it's fair to say the revenue growth recently has been undesirable for the company.

Shifting to the future, estimates from the six analysts covering the company suggest revenue should grow by 23% over the next year. That's shaping up to be materially lower than the 29% growth forecast for the broader industry.

With this information, we can see why B-SOFTLtd is trading at a P/S lower than the industry. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On B-SOFTLtd's P/S

B-SOFTLtd's recently weak share price has pulled its P/S back below other Healthcare Services companies. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

We've established that B-SOFTLtd maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. The company will need a change of fortune to justify the P/S rising higher in the future.

And what about other risks? Every company has them, and we've spotted 1 warning sign for B-SOFTLtd you should know about.

If these risks are making you reconsider your opinion on B-SOFTLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.