You may think that with a price-to-sales (or "P/S") ratio of 1.6x Shaanxi Broadcast & TV Network Intermediary(Group)Co.,Ltd. (SHSE:600831) is a stock worth checking out, seeing as almost half of all the Media companies in China have P/S ratios greater than 2.9x and even P/S higher than 7x aren't out of the ordinary. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

Check out our latest analysis for Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd

How Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd Has Been Performing

For example, consider that Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's financial performance has been poor lately as its revenue has been in decline. 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.

Is There Any Revenue Growth Forecasted For Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 16%. This has erased any of its gains during the last three years, with practically no change in revenue being achieved in total. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

This is in contrast to the rest of the industry, which is expected to grow by 22% over the next year, materially higher than the company's recent medium-term annualised growth rates.

With this information, we can see why Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd 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.

The Final Word

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Our examination of Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd 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.

Plus, you should also learn about these 2 warning signs we've spotted with Shaanxi Broadcast & TV Network Intermediary(Group)Co.Ltd.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.