Unfortunately for some shareholders, the Kaiyuan Education Technology Group Co., Ltd. (SZSE:300338) share price has dived 26% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 45% in that time.

Since its price has dipped substantially, Kaiyuan Education Technology Group's price-to-sales (or "P/S") ratio of 1.9x 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 3.6x and even P/S above 7x are quite common. 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 Kaiyuan Education Technology Group Has Been Performing

For instance, Kaiyuan Education Technology Group's receding revenue in recent times would have to be some food for thought. Perhaps the market believes the recent revenue performance isn't good enough to keep up the industry, causing the P/S ratio to suffer. Those who are bullish on Kaiyuan Education Technology Group will be hoping that this isn't the case so that they can pick up the stock at a lower valuation.

Is There Any Revenue Growth Forecasted For Kaiyuan Education Technology Group?

The only time you'd be truly comfortable seeing a P/S as low as Kaiyuan Education Technology Group's is when the company's growth is on track to lag the industry.

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 15%. The last three years don't look nice either as the company has shrunk revenue by 49% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Comparing that to the industry, which is predicted to deliver 23% growth in the next 12 months, the company's downward momentum based on recent medium-term revenue results is a sobering picture.

In light of this, it's understandable that Kaiyuan Education Technology Group's P/S would sit below the majority of other companies. Nonetheless, there's no guarantee the P/S has reached a floor yet with revenue going in reverse. Even just maintaining these prices could be difficult to achieve as recent revenue trends are already weighing down the shares.

What Does Kaiyuan Education Technology Group's P/S Mean For Investors?

Kaiyuan Education Technology Group's recently weak share price has pulled its P/S back below other Electronic companies. 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 Kaiyuan Education Technology Group confirms that the company's shrinking revenue over the past medium-term is a key factor in its low price-to-sales ratio, given the industry is projected to grow. At this stage investors feel the potential for an improvement in revenue isn't great enough to justify a higher P/S ratio. If recent medium-term revenue trends continue, it's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Plus, you should also learn about these 3 warning signs we've spotted with Kaiyuan Education Technology Group.

If you're unsure about the strength of Kaiyuan Education Technology Group'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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