Fujian Green Pine Co., Ltd. (SZSE:300132) shareholders that were waiting for something to happen have been dealt a blow with a 26% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.

Since its price has dipped substantially, Fujian Green Pine may be sending buy signals at present with its price-to-sales (or "P/S") ratio of 0.9x, considering almost half of all companies in the Chemicals industry in China have P/S ratios greater than 2x and even P/S higher than 4x 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.

How Fujian Green Pine Has Been Performing

While the industry has experienced revenue growth lately, Fujian Green Pine's revenue has gone into reverse gear, which is not great. Perhaps the P/S remains low as investors think the prospects of strong revenue growth aren't on the horizon. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

What Are Revenue Growth Metrics Telling Us About The Low P/S?

There's an inherent assumption that a company should underperform the industry for P/S ratios like Fujian Green Pine's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 30% decrease to the company's top line. The last three years don't look nice either as the company has shrunk revenue by 41% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 7.1% over the next year. With the industry predicted to deliver 27% growth, the company is positioned for a weaker revenue result.

In light of this, it's understandable that Fujian Green Pine's P/S sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Fujian Green Pine's P/S?

The southerly movements of Fujian Green Pine's shares means its P/S is now sitting at a pretty low level. 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.

We've established that Fujian Green Pine maintains its low P/S on the weakness of its forecast growth being lower than the wider industry, as expected. Right now shareholders are accepting the low P/S as they concede future revenue probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Fujian Green Pine with six simple checks on some of these key factors.

If these risks are making you reconsider your opinion on Fujian Green Pine, 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.