Unfortunately for some shareholders, the Sansheng Intellectual Education Technology CO.,LTD. (SZSE:300282) share price has dived 27% in the last thirty days, prolonging recent pain. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 64% loss during that time.

Since its price has dipped substantially, Sansheng Intellectual Education TechnologyLTD's price-to-sales (or "P/S") ratio of 2.7x might make it look like a buy right now compared to the Electronic industry in China, where around half of the companies have P/S ratios above 3.7x and even P/S above 7x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/S.

Check out our latest analysis for Sansheng Intellectual Education TechnologyLTD

How Has Sansheng Intellectual Education TechnologyLTD Performed Recently?

For example, consider that Sansheng Intellectual Education TechnologyLTD's financial performance has been poor lately as its revenue has been in decline. It might be that many expect the disappointing revenue performance to continue or accelerate, which has repressed the P/S. 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 Sansheng Intellectual Education TechnologyLTD?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Sansheng Intellectual Education TechnologyLTD's to be considered reasonable.

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 9.9%. As a result, revenue from three years ago have also fallen 39% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

In contrast to the company, the rest of the industry is expected to grow by 60% over the next year, which really puts the company's recent medium-term revenue decline into perspective.

With this in mind, we understand why Sansheng Intellectual Education TechnologyLTD's P/S is lower than most of its industry peers. However, we think shrinking revenues are unlikely to lead to a stable P/S over the longer term, which could set up shareholders for future disappointment. There's potential for the P/S to fall to even lower levels if the company doesn't improve its top-line growth.

What Does Sansheng Intellectual Education TechnologyLTD's P/S Mean For Investors?

Sansheng Intellectual Education TechnologyLTD's recently weak share price has pulled its P/S back below other Electronic companies. 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.

As we suspected, our examination of Sansheng Intellectual Education TechnologyLTD revealed its shrinking revenue over the medium-term is contributing to its low P/S, given the industry is set to grow. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises either. Given the current circumstances, it seems unlikely that the share price will experience any significant movement in either direction in the near future if recent medium-term revenue trends persist.

You need to take note of risks, for example - Sansheng Intellectual Education TechnologyLTD has 4 warning signs (and 3 which are a bit concerning) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.