Shenzhen Jianyi Decoration Group Co., Ltd. (SZSE:002789) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 37% in that time.

Although its price has dipped substantially, Shenzhen Jianyi Decoration Group's price-to-sales (or "P/S") ratio of 0.4x might still make it look like a strong buy right now compared to the wider Professional Services industry in China, where around half of the companies have P/S ratios above 2.7x and even P/S above 8x are quite common. However, the P/S might be quite low for a reason and it requires further investigation to determine if it's justified.

What Does Shenzhen Jianyi Decoration Group's Recent Performance Look Like?

Shenzhen Jianyi Decoration Group certainly has been doing a great job lately as it's been growing its revenue at a really rapid pace. One possibility is that the P/S ratio is low because investors think this strong revenue growth might actually underperform the broader industry in the near future. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Revenue Growth Forecasted For Shenzhen Jianyi Decoration Group?

In order to justify its P/S ratio, Shenzhen Jianyi Decoration Group would need to produce anemic growth that's substantially trailing the industry.

Retrospectively, the last year delivered an exceptional 145% gain to the company's top line. The strong recent performance means it was also able to grow revenue by 80% in total over the last three years. So we can start by confirming that the company has done a great job of growing revenue over that time.

It's interesting to note that the rest of the industry is similarly expected to grow by 23% over the next year, which is fairly even with the company's recent medium-term annualised growth rates.

With this in consideration, we find it intriguing that Shenzhen Jianyi Decoration Group's P/S falls short of its industry peers. It may be that most investors are not convinced the company can maintain recent growth rates.

What We Can Learn From Shenzhen Jianyi Decoration Group's P/S?

Shenzhen Jianyi Decoration Group's P/S looks about as weak as its stock price lately. 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.

Our examination of Shenzhen Jianyi Decoration Group revealed its three-year revenue trends looking similar to current industry expectations hasn't given the P/S the boost we expected, given that it's lower than the wider industry P/S, When we see industry-like revenue growth but a lower than expected P/S, we assume potential risks are what might be placing downward pressure on the share price. medium-term

Before you take the next step, you should know about the 2 warning signs for Shenzhen Jianyi Decoration Group (1 is significant!) that we have uncovered.

If strong companies turning a profit tickle your fancy, then you'll want to check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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