The Shenzhen Xunjiexing Technology Corp. Ltd. (SHSE:688655) share price has fared very poorly over the last month, falling by a substantial 25%. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 13% share price drop.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about Shenzhen Xunjiexing Technology's P/S ratio of 3.3x, since the median price-to-sales (or "P/S") ratio for the Electronic industry in China is also close to 3.8x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Check out our latest analysis for Shenzhen Xunjiexing Technology

What Does Shenzhen Xunjiexing Technology's Recent Performance Look Like?

We'd have to say that with no tangible growth over the last year, Shenzhen Xunjiexing Technology's revenue has been unimpressive. Perhaps the market believes the recent run-of-the-mill revenue performance isn't enough to outperform the industry, which has kept the P/S muted. If not, then existing shareholders may be feeling hopeful about the future direction of the share price.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like Shenzhen Xunjiexing Technology's to be considered reasonable.

Retrospectively, the last year delivered virtually the same number to the company's top line as the year before. That's essentially a continuation of what we've seen over the last three years, as its revenue growth has been virtually non-existent for that entire period. So it seems apparent to us that the company has struggled to grow revenue meaningfully over that time.

Comparing that to the industry, which is predicted to deliver 61% growth in the next 12 months, the company's momentum is weaker, based on recent medium-term annualised revenue results.

In light of this, it's curious that Shenzhen Xunjiexing Technology's P/S sits in line with the majority of other companies. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

The Bottom Line On Shenzhen Xunjiexing Technology's P/S

Following Shenzhen Xunjiexing Technology's share price tumble, its P/S is just clinging on to the industry median P/S. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Shenzhen Xunjiexing Technology's average P/S is a bit surprising since its recent three-year growth is lower than the wider industry forecast. When we see weak revenue with slower than industry growth, we suspect the share price is at risk of declining, bringing the P/S back in line with expectations. If recent medium-term revenue trends continue, the probability of a share price decline will become quite substantial, placing shareholders at risk.

And what about other risks? Every company has them, and we've spotted 4 warning signs for Shenzhen Xunjiexing Technology (of which 2 are concerning!) you should know about.

If these risks are making you reconsider your opinion on Shenzhen Xunjiexing Technology, 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.