The QITIAN Technology Group Co., Ltd. (SZSE:300061) share price has fared very poorly over the last month, falling by a substantial 27%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 43% share price drop.

Since its price has dipped substantially, QITIAN Technology Group may be sending bullish signals at the moment with its price-to-sales (or "P/S") ratio of 2.7x, since almost half of all companies in the Medical Equipment industry in China have P/S ratios greater than 5.4x and even P/S higher than 9x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for QITIAN Technology Group

What Does QITIAN Technology Group's P/S Mean For Shareholders?

For example, consider that QITIAN Technology Group's financial performance has been poor lately as its revenue has been in decline. One possibility is that the P/S is low because investors think the company won't do enough to avoid underperforming the broader industry in the near future. 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.

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

QITIAN Technology Group'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.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 12%. The last three years don't look nice either as the company has shrunk revenue by 19% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 26% shows it's an unpleasant look.

With this information, we are not surprised that QITIAN Technology Group is trading at a P/S lower than the industry. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does QITIAN Technology Group's P/S Mean For Investors?

QITIAN Technology Group's P/S has taken a dip along with its share price. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of QITIAN Technology Group revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

You should always think about risks. Case in point, we've spotted 1 warning sign for QITIAN Technology Group you should be aware of.

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

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