The BOMESC Offshore Engineering Company Limited (SHSE:603727) share price has fared very poorly over the last month, falling by a substantial 26%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 23% in that time.

Since its price has dipped substantially, considering around half the companies operating in China's Energy Services industry have price-to-sales ratios (or "P/S") above 2x, you may consider BOMESC Offshore Engineering as an solid investment opportunity with its 1.2x P/S ratio. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's limited.

What Does BOMESC Offshore Engineering's P/S Mean For Shareholders?

BOMESC Offshore Engineering could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. The P/S ratio is probably low because investors think this poor revenue performance isn't going to get any better. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

How Is BOMESC Offshore Engineering's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like BOMESC Offshore Engineering'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 35%. At least revenue has managed not to go completely backwards from three years ago in aggregate, thanks to the earlier period of growth. Accordingly, shareholders probably wouldn't have been overly satisfied with the unstable medium-term growth rates.

Shifting to the future, estimates from the three analysts covering the company suggest revenue should grow by 1.3% over the next year. That's shaping up to be materially lower than the 18% growth forecast for the broader industry.

In light of this, it's understandable that BOMESC Offshore Engineering's P/S sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What Does BOMESC Offshore Engineering's P/S Mean For Investors?

BOMESC Offshore Engineering's P/S has taken a dip along with its share price. 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.

As we suspected, our examination of BOMESC Offshore Engineering's analyst forecasts revealed that its inferior revenue outlook is contributing to its low P/S. Shareholders' pessimism on the revenue prospects for the company seems to be the main contributor to the depressed P/S. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for BOMESC Offshore Engineering you should be aware of.

If you're unsure about the strength of BOMESC Offshore Engineering's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.