The Zhejiang Tuna Environmental Science & TechnologyCo.,Ltd. (SHSE:603177) share price has fared very poorly over the last month, falling by a substantial 29%. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 52% loss during that time.

Even after such a large drop in price, you could still be forgiven for feeling indifferent about Zhejiang Tuna Environmental Science & TechnologyCo.Ltd's P/S ratio of 2.1x, since the median price-to-sales (or "P/S") ratio for the Commercial Services industry in China is also close to 2.7x. While this might not raise any eyebrows, if the P/S ratio is not justified investors could be missing out on a potential opportunity or ignoring looming disappointment.

How Zhejiang Tuna Environmental Science & TechnologyCo.Ltd Has Been Performing

Revenue has risen firmly for Zhejiang Tuna Environmental Science & TechnologyCo.Ltd recently, which is pleasing to see. Perhaps the market is expecting future revenue performance to only keep up with the broader industry, which has keeping the P/S in line with expectations. Those who are bullish on Zhejiang Tuna Environmental Science & TechnologyCo.Ltd will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

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

Zhejiang Tuna Environmental Science & TechnologyCo.Ltd's P/S ratio would be typical for a company that's only expected to deliver moderate growth, and importantly, perform in line with the industry.

Taking a look back first, we see that the company grew revenue by an impressive 26% last year. The strong recent performance means it was also able to grow revenue by 47% in total over the last three years. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 30% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

With this in mind, we find it intriguing that Zhejiang Tuna Environmental Science & TechnologyCo.Ltd's P/S is comparable to that of its industry peers. Apparently many investors in the company are less bearish than recent times would indicate and aren't willing to let go of their stock right now. They may be setting themselves up for future disappointment if the P/S falls to levels more in line with recent growth rates.

The Bottom Line On Zhejiang Tuna Environmental Science & TechnologyCo.Ltd's P/S

With its share price dropping off a cliff, the P/S for Zhejiang Tuna Environmental Science & TechnologyCo.Ltd looks to be in line with the rest of the Commercial Services industry. 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 Zhejiang Tuna Environmental Science & TechnologyCo.Ltd revealed its poor three-year revenue trends aren't resulting in a lower P/S as per our expectations, given they look worse than current industry outlook. Right now we are uncomfortable with the P/S as this revenue performance isn't likely to support a more positive sentiment for long. Unless there is a significant improvement in the company's medium-term performance, it will be difficult to prevent the P/S ratio from declining to a more reasonable level.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Zhejiang Tuna Environmental Science & TechnologyCo.Ltd that you should be aware of.

If these risks are making you reconsider your opinion on Zhejiang Tuna Environmental Science & TechnologyCo.Ltd, 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.