Jianzhi Education Technology Group Company Limited (NASDAQ:JZ) shareholders have had their patience rewarded with a 30% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 36% over that time.

Even after such a large jump in price, it would still be understandable if you think Jianzhi Education Technology Group is a stock with good investment prospects with a price-to-sales ratios (or "P/S") of 0.4x, considering almost half the companies in the United States' Consumer Services industry have P/S ratios above 1.4x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

What Does Jianzhi Education Technology Group's Recent Performance Look Like?

As an illustration, revenue has deteriorated at Jianzhi Education Technology Group over the last year, which is not ideal at all. 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. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

How Is Jianzhi Education Technology Group's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Jianzhi Education Technology Group's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 13% decrease to the company's top line. Regardless, revenue has managed to lift by a handy 8.8% in aggregate from three years ago, thanks to the earlier period of growth. So we can start by confirming that the company has generally done a good job of growing revenue over that time, even though it had some hiccups along the way.

This is in contrast to the rest of the industry, which is expected to grow by 13% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Jianzhi Education Technology Group's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the wider industry.

The Bottom Line On Jianzhi Education Technology Group's P/S

Jianzhi Education Technology Group's stock price has surged recently, but its but its P/S still remains modest. 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.

Our examination of Jianzhi Education Technology Group confirms that the company's revenue trends over the past three-year years are a key factor in its low price-to-sales ratio, as we suspected, given they fall short of 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. If recent medium-term revenue trends continue, it's hard to see the share price experience a reversal of fortunes anytime soon.

Before you settle on your opinion, we've discovered 5 warning signs for Jianzhi Education Technology Group (4 can't be ignored!) that you should be aware of.

If you're unsure about the strength of Jianzhi Education Technology Group's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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