The Suzhou Jinfu Technology Co., Ltd. (SZSE:300128) share price has fared very poorly over the last month, falling by a substantial 30%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 17% share price drop.

Since its price has dipped substantially, Suzhou Jinfu Technology 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 Electronic industry in China have P/S ratios greater than 3.5x and even P/S higher than 7x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

View our latest analysis for Suzhou Jinfu Technology

What Does Suzhou Jinfu Technology's P/S Mean For Shareholders?

The revenue growth achieved at Suzhou Jinfu Technology over the last year would be more than acceptable for most companies. Perhaps the market is expecting this acceptable revenue performance to take a dive, which has kept the P/S suppressed. 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?

Suzhou Jinfu Technology'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.

Taking a look back first, we see that the company grew revenue by an impressive 24% last year. As a result, it also grew revenue by 16% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Comparing that to the industry, which is predicted to deliver 60% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in consideration, it's easy to understand why Suzhou Jinfu Technology's P/S falls short of the mark set by its industry peers. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

What Does Suzhou Jinfu Technology's P/S Mean For Investors?

Suzhou Jinfu Technology's recently weak share price has pulled its P/S back below other Electronic companies. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Suzhou Jinfu Technology revealed its three-year revenue trends are contributing to its low P/S, given they look worse than current industry expectations. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for Suzhou Jinfu Technology that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.