Shaanxi Broadcast & TV Network Intermediary(Group)Co.,Ltd. (SHSE:600831) shares have continued their recent momentum with a 30% gain in the last month alone. Not all shareholders will be feeling jubilant, since the share price is still down a very disappointing 50% in the last twelve months.

In spite of the firm bounce in price, Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's price-to-sales (or "P/S") ratio of 1.2x might still make it look like a strong buy right now compared to the wider Media industry in China, where around half of the companies have P/S ratios above 3.3x and even P/S above 7x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

What Does Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S Mean For Shareholders?

As an illustration, revenue has deteriorated at Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd over the last year, which is not ideal at all. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.

Do Revenue Forecasts Match The Low P/S Ratio?

In order to justify its P/S ratio, Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd would need to produce anemic growth that's substantially trailing 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 36%. This means it has also seen a slide in revenue over the longer-term as revenue is down 40% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for expansion of 15% shows it's an unpleasant look.

In light of this, it's understandable that Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

The Bottom Line On Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's P/S

Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's recent share price jump still sees fails to bring its P/S alongside the industry median. 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 Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 2 warning signs for Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd that you need to take into consideration.

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.