The Sino Prima Gas Technology Co., Ltd. (SZSE:300483) share price has fared very poorly over the last month, falling by a substantial 27%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 37% in that time.

Even after such a large drop in price, it's still not a stretch to say that Sino Prima Gas Technology's price-to-sales (or "P/S") ratio of 1.5x right now seems quite "middle-of-the-road" compared to the Oil and Gas industry in China, where the median P/S ratio is around 1.2x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

How Has Sino Prima Gas Technology Performed Recently?

For example, consider that Sino Prima Gas Technology's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the company to put the disappointing revenue performance behind them over the coming period, which has kept the P/S from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Sino Prima Gas Technology's Revenue Growth Trending?

In order to justify its P/S ratio, Sino Prima Gas Technology would need to produce growth that's similar to 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 24%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Therefore, it's fair to say that revenue growth has been inconsistent recently for the company.

It's interesting to note that the rest of the industry is similarly expected to grow by 2.1% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Sino Prima Gas Technology's P/S sits in line with the majority of other companies. It seems most investors are expecting to see average growth rates continue into the future and are only willing to pay a moderate amount for the stock.

The Key Takeaway

Following Sino Prima Gas Technology's share price tumble, its P/S is just clinging on to the industry median P/S. 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.

It appears to us that Sino Prima Gas Technology maintains its moderate P/S off the back of its recent three-year growth being in line with the wider industry forecast. Right now shareholders are comfortable with the P/S as they are quite confident future revenue won't throw up any surprises. Unless the recent medium-term conditions change, they will continue to support the share price at these levels.

You always need to take note of risks, for example - Sino Prima Gas Technology has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on Sino Prima Gas Technology, explore our interactive list of high quality stocks to get an idea of what else is out there.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.