Asia Cuanon Technology (Shanghai) Co.,Ltd. (SHSE:603378) shareholders are no doubt pleased to see that the share price has bounced 28% in the last month, although it is still struggling to make up recently lost ground. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 36% in the last twelve months.

Even after such a large jump in price, Asia Cuanon Technology (Shanghai)Ltd's price-to-sales (or "P/S") ratio of 1x might still make it look like a buy right now compared to the Chemicals industry in China, where around half of the companies have P/S ratios above 2.1x and even P/S above 5x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

What Does Asia Cuanon Technology (Shanghai)Ltd's P/S Mean For Shareholders?

Asia Cuanon Technology (Shanghai)Ltd could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Do Revenue Forecasts Match The Low P/S Ratio?

Asia Cuanon Technology (Shanghai)Ltd'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, the company's revenue growth last year wasn't something to get excited about as it posted a disappointing decline of 6.0%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

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 similar to the 25% growth forecast for the broader industry.

With this information, we find it odd that Asia Cuanon Technology (Shanghai)Ltd is trading at a P/S lower than the industry. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Asia Cuanon Technology (Shanghai)Ltd's P/S?

Asia Cuanon Technology (Shanghai)Ltd's stock price has surged recently, but its but its P/S still remains modest. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've seen that Asia Cuanon Technology (Shanghai)Ltd currently trades on a lower than expected P/S since its forecast growth is in line with the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Asia Cuanon Technology (Shanghai)Ltd that you should be aware of.

If these risks are making you reconsider your opinion on Asia Cuanon Technology (Shanghai)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.