Zhejiang Juli Culture Development Co.,Ltd. (SZSE:002247) shares have had a horrible month, losing 26% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 35% in that time.

Since its price has dipped substantially, Zhejiang Juli Culture DevelopmentLtd may be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 1.6x, since almost half of all companies in the Entertainment industry in China have P/S ratios greater than 6x and even P/S higher than 12x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How Has Zhejiang Juli Culture DevelopmentLtd Performed Recently?

As an illustration, revenue has deteriorated at Zhejiang Juli Culture DevelopmentLtd 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. Those who are bullish on Zhejiang Juli Culture DevelopmentLtd will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Is There Any Revenue Growth Forecasted For Zhejiang Juli Culture DevelopmentLtd?

The only time you'd be truly comfortable seeing a P/S as depressed as Zhejiang Juli Culture DevelopmentLtd's is when the company's growth is on track to lag the industry decidedly.

Retrospectively, the last year delivered a frustrating 8.7% decrease to the company's top line. Still, the latest three year period has seen an excellent 39% overall rise in revenue, in spite of its unsatisfying short-term performance. So we can start by confirming that the company has generally done a very 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 36% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Zhejiang Juli Culture DevelopmentLtd is trading at a P/S lower than the industry. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.

What Does Zhejiang Juli Culture DevelopmentLtd's P/S Mean For Investors?

Having almost fallen off a cliff, Zhejiang Juli Culture DevelopmentLtd's share price has pulled its P/S way down as well. 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.

Our examination of Zhejiang Juli Culture DevelopmentLtd 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. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

The company's balance sheet is another key area for risk analysis. Our free balance sheet analysis for Zhejiang Juli Culture DevelopmentLtd with six simple checks will allow you to discover any risks that could be an issue.

If these risks are making you reconsider your opinion on Zhejiang Juli Culture DevelopmentLtd, 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.